While the U.K.’s Financial Reporting Council investigates Deloitte’s 2015 and 2016 audits of SIG, the building products distributor has selected EY as its new auditor, according to the Financial Times.
EY was the only Big 4 firm eligible to bid for the SIG contract, which according to The Times newspaper, is worth about £1.6 million a year.
Deloitte was out, as SIG dismissed Deloitte as the company’s auditor in May. KPMG was out because it is SIG’s internal auditor. And PwC was out because it has provided SIG with IT advice, posing a potential conflict of interest, according to the Financial Times article.
Outside of the Big 4, there wasn’t much competition for EY either:
SIG was also unable to ask Grant Thornton, Britain’s fifth-largest accounting firm, to participate in the tender process as the firm declared in March that it would no longer bid for FTSE 350 audit contracts because of the high costs involved and the difficulty of competing with the Big Four. …
BDO, Britain’s sixth-largest accounting firm, also bid for the SIG contract. Gervase MacGregor, a partner at the firm, said BDO was “very disappointed” to have not secured the audit.
“We did pitch, we thought we had a good chance, and we put a very good team on it. We are very disappointed, but it won’t put us off pitching for other large listed companies,” he said.
The FRC probe comes as SIG reviews its historic accounts after a whistleblowing allegation of potential accounting irregularities led to the suspension of some staff for overstating profits over several years, Reuters reported.
SIG said in February that it was working with Deloitte to ensure “the correct accounting treatment,” but in May, 78% of SIG investors voted against Deloitte’s reappointment as auditor.
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