MARKS & Spencer Group has dropped PricewaterhouseCoopers (PwC) as its auditor, ending a relationship that dates from 1926.
M&S has decided to work with Deloitte, one of PwC’s biggest rivals, as European Union regulators consider introducing new rules to make the auditing market more competitive.
Marks & Spencer Group yesterday confirmed that it had concluded the formal tender process for its statutory audit contract.
The statement added: “Following completion of the audit of the accounts for the year ending March 29 2014, Deloitte will be appointed as M&S’s statutory auditor, subject to approval by shareholders at the AGM.”
Andy Halford, chairman of the M&S Audit Committee, said: “We thank PricewaterhouseCoopers for their significant contribution as M&S’s auditors. We look forward to working with Deloitte going forward.”
A spokesman for PwC said: “Competition in the audit market is fierce and we do expect to see more companies switch auditor in response to regulatory change.
“We continue to retain and win audit clients, as we have done recently with companies such as HSBC, Hargreaves Lansdown and Ladbrokes. We invest significantly in our audit practice to ensure we deliver high quality and challenging audits.”
PwC has around 650 staff in Yorkshire and the Humber, while Deloitte has 430 staff in its Leeds office.
In October, the UK pulled back from accounting reforms that would have forced top companies to change book-keepers every five years.
The move puts regulators potentially at odds with tougher reforms which are likely to be introduced across the European Union. The reforms are part of a regulatory clampdown following the financial crisis.
Auditors had given banks a clean bill of health, just before many had to be rescued by taxpayers. Critics have also said the ‘Big Four’ accountancy groups have developed too-cosy relationships with top company executives, and there has not been enough competition in the market.
Under proposals released by the UK Competition Commission, the top 350 UK companies would be forced to put their book-keeping out to tender at least once a decade, to shake up a market dominated by KPMG, PwC, Ernst & Young (EY) and Deloitte.
The Big Four firms employ a combined total of 2,000 people in Yorkshire. However, the changes, which would take effect from the final quarter of 2014, don’t include an earlier draft recommendation that would have forced companies to re-tender their audit work every five years.
The competition watchdog shied away from a much tougher option: forcing companies to change their accountant on a regular basis, a step the EU is believed by some analysts to be considering. In October, David Barnes, managing partner at Deloitte UK, said the audit market had changed since the competition watchdog began its probe two years ago, with more tenders taking place.
Ian Morrison, partner and PwC’s northern head of assurance, said at the time: “The Competition Commission’s decision to mandate tendering every 10 years recognises strong concerns from investors, the Financial Reporting Council, companies and the market that a five-year interval would have created a disproportionate burden to business, and risked undermining the intensity of competition and audit quality.”
In 2010, the Big Four were criticised by a House of Lords committee over conflicts of interest and the quality of published accounts. The committee also said the failure of auditors to communicate regularly with regulators ahead of the banking crash of 2008/09 amounted to a “dereliction of duty”.
Last year, the competition watchdog said its probe of the market for company audits had not uncovered any evidence of collusion among top accounting firms over market share. Smaller accounting firms like Mazars, BDO, Grant Thornton and Reeves have called for regulatory intervention to help them compete more effectively with the Big Four.
James Roberts, senior audit partner at BDO, said yesterday: “The audit market is not going to change fundamentally overnight and, of course, there will always be movement among the Big Four firms.
“Making the market more competitive and less polarised is about long-term education. We are already making good progress and talking to a large number of companies that just a year ago would not have been engaging with BDO.”
Earlier this year, Professor Peter Moizer, the Dean of Leeds University Business School, told the Yorkshire Post: “It’s a tough market and most of the money for the Big Four doesn’t come from audit, it’s the rest of the services.”