Vodafone is poised to start out a scramble for considered one of company Britain’s most profitable audit contracts because it prepares to ditch PricewaterhouseCoopers (PwC) amid an ongoing authorized row over the collapse of Telephones 4U, the excessive avenue retailer.
Sky Information has learnt that Vodafone, which has a market worth of practically £43bn, is anticipated to determine inside weeks that it’ll launch a course of to nominate a brand new auditor.
The transfer, which might put the opposite large 4 accountancy corporations on discover, might present an early test-case for measures unveiled this week to bolster competitors throughout the sector.
The Competitors and Markets Authority (CMA) has really helpful that the occupation be overhauled by means of the creation of a system of joint audits, which might contain all FTSE-350 corporations being obliged to nominate a second auditor from outdoors the trade’s dominant quartet.
Vodafone has been contemplating parting firm with PwC – which has overseen the cell phone big’s books since 2014 – for greater than a yr.
The problem has arisen due to the persistent risk of litigation towards Vodafone from PwC in its position as administrator to Telephones 4U, which collapsed 4 years in the past after the cell community and a few of its rivals cancelled their distribution contracts with the retailer.
Final month, The Day by day Telegraph reported that PwC had known as in an insolvency knowledgeable to assist determine whether or not to press the button on damages claims towards the cell networks which might run to tons of of tens of millions of kilos.
Vodafone requested Deloitte, EY and KPMG final yr to free themselves from potential conflicts in non-audit work that may forestall them taking up the audit position.
In accordance with Vodafone’s newest annual report, the corporate paid PwC €21m in audit charges throughout the 2018 monetary yr, in addition to €5m of non-audit charges.
Sources mentioned on Tuesday that Vodafone had but to make a ultimate choice to tender its audit contract however that it was now “overwhelmingly possible”.
The scenario surrounding Vodafone’s accounts underlines the difficulties confronted by the large 4 corporations in managing conflicts.
Rachel Reeves, the Labour MP who chairs the Enterprise, Power and Industrial Technique choose committee, mentioned that such conflicts had been proven to “jeopardise audit high quality”.
A spate of opinions into the occupation was triggered by political anger over the position of accountants within the collapse of corporations equivalent to BHS and Carillion.
Nonetheless, the CMA proposals for joint audits, ring-fencing inside the large 4 corporations and a potential market share cap met with scepticism from executives throughout the spectrum.
One mentioned they had been “unworkable”.
Within the case of Vodafone, at the least one of many remaining trio of corporations is believed to not be able the place it might tackle the audit contract – that means that the race to exchange PwC might contain simply two corporations.
Vodafone’s multinational nature would make it impractical for a participant outdoors the large 4 to deal with the work.
Its potential tender course of may be difficult by the truth that David Nish, the non-executive director who chairs its audit committee, is a former Value Waterhouse accomplice.
The problem of PwC’s independence has been raised by traders as a trigger for alarm, with Institutional Shareholder Companies, an adviser to fund managers on voting selections, warning final yr that it raised “apparent issues round conflicts of curiosity and auditor independence”.
ISS added, nonetheless: “To its credit score, the [Vodafone] audit committee has been proactive in addressing the difficulty head-on, consulting each with regulators and main shareholders when the difficulty got here to gentle.”
Vodafone has insisted that sturdy steps are in place to make sure PwC’s independence, together with guaranteeing the bodily separation between the audit group liable for overseeing the corporate’s accounts and the Telephones 4U administration group.
Confidential materials was being saved individually, with extremely restricted entry, it mentioned final yr.
If it does lose the Vodafone audit position, it might be a blow to PwC, which changed Deloitte in 2014.
PwC has been hit this yr by various regulatory complications, together with the imposition of a file fantastic on the agency over its auditing of BHS, which collapsed in 2016 with the lack of 11,000 jobs.
Vodafone and PwC declined to remark.