ONE IN SEVEN FTSE 350 companies have completed or intend to carry out audit tenders this year, research from PwC has found.
A study of audits among UK listed entities found 17 businesses had finished tenders to 8 July, 14 were underway and seven companies had announced they are considering tenders. An additional 18 companies are expected to review arrangements, meaning a total of 56 businesses could take their audit contract to market in 2014.
This is almost double the number of tenders carried out in 2013, when 30 bidding exercises were carried out. In 2012, just 12 audit tenders were completed.
The surge in activity comes ahead of the Competition and Market Authority’s (previously the Competition Commission) orders on mandatory tendering come into force in October. The policy will compel FTSE 350 businesses to review their agreements at least every ten years, while EU rules will soon restrict the level of non-audit fees and types of non-audit work that can be carried out by an appointed firm.
Following the introduction of the FRC’s comply or explain ten-year tendering rules in October 2012, 51 companies have taken their contract to market. Of these, 75% of FTSE 100 businesses switched their auditor; this dropped to 62% for the FTSE 250.
PwC UK head of assurance James Chalmers said tendering has reached “unprecedented levels”.
“Now that there is greater clarity on the implications of the EU rules, companies are able to make decisions on when to tender at a time that makes most sense for their particular circumstances,” he said. “For some, that means going early, for others it means going later, but – crucially – the choice is still theirs to make.”
In recent months, EY replaced PwC as auditor of FTSE 250 funeral services provider Dignity, due to the level of non-audit fees the latter earns from the business. EY also replaced PwC at the London Stock Exchange and Sage, while PwC took over the Bunzl audit contract from KPMG.