Sometimes relationships outlive their usefulness, especially when one partner takes the beer goggles off and realizes that the other partner has been acting kinda shady lately, become too expensive to be with, and the old adage, “You can’t put lipstick on a pig,” seems more fitting each day.
That expensive pig with lipstick on is KPMG, and after 15 years of having the shady swine audit its financial statements, U.K.-based movie theater chain Cineworld is moving on.
Cineworld, which is the parent company of Regal Cinemas in the U.S., announced on June 17 that it had chosen PwC as its new external auditor, effective June 17, following the outcome of a bidding process, according to published reports across the pond. KPMG didn’t submit a bid for the new contract.
As The Times reported, while Cineworld made it seem like switching auditors was just “good corporate governance,” in reality, the cause of the break-up between Cineworld and KPMG was most likely over fees. KPMG said in its resignation letter on June 17:
“The reason connected with our ceasing to hold office is the holding of a competitive tender for the audit, in which we declined to participate as we did not consider that it was likely that we would be able to agree acceptable commercial terms.”
Economia reported that KPMG was paid $2.2 million (£1.7 million) in audit fees for its group audit for the year ended December 2018, up from $0.7 million during the previous period. The firm also was paid $1.7 million for other advisory services for the year ended December 2017.
Cineworld’s audit committee had previously conducted a bidding process three years ago and eventually recommended that KPMG be reappointed as the company’s independent auditor.
Due to mandatory audit rotation rules in the U.K., the next auditor bidding process was required to take place in 2026.
I guess Cineworld just couldn’t wait that long to kick KPMG to the curb.