Wednesday, 29 March 2017

BT in urgent hunt for 'clean' auditor after £530m Italy scandal



BT Group is trying to secure the quick-fire appointment of a new auditor, two months after the emergence of a £530m accounting black hole at its business services division in Italy.
 
Sky News has learnt that Britain's biggest telecoms and broadband provider is attempting to replace PricewaterhouseCoopers (PwC) at the earliest possible opportunity - but is being hampered by rules requiring a cooling-off period for any replacement provider of audit services.


Nick Rose, the non-executive director who chairs BT's audit committee, wrote to the Financial Reporting Council (FRC), the accounting watchdog, last week to inform it of the company's plans to accelerate PwC's replacement, sources said on Wednesday.


Mr Rose is understood to have told the regulator that BT had lost confidence in PwC, which has audited the company since it listed on the London Stock Exchange in 1984, and was working to ensure that another firm would be deemed independent as rapidly as possible.


BT and the FRC both declined to comment on the letter.


Strict rules in the accountancy profession mean that auditors must be "cleansed" after undertaking prohibited non-audit services for listed companies for at least a year - a requirement which poses a headache for BT because of its extensive use of all of the "big four" audit forms.


Deloitte, for example, is conducting extensive IT work for BT, which means it will not be eligible to replace PwC, according to City insiders.


That leaves EY and KPMG as potential alternative auditors for the FTSE-100 telecoms group.


Both, however, are also involved in significant amounts of work for BT, some of which they are now being stood down from in order to ensure their independence.
 
 
Firms outside the "big four" would be regarded as incapable of managing the audit of a company as sizeable as BT, industry sources said.


Sources pointed out that the FRC had no authority to grant exemptions to the legal requirements relating to audit independence.


In its 2016 annual report, BT said it proposed tendering its audit contract no later than 2019, with the new auditors appointed no later than for its financial year starting in April 2020.


"However, the committee keeps the external audit arrangements under annual review and may elect to accelerate the planned appointment of new auditors if appropriate, for example for service quality or independence reasons," it added.


The move to replace PwC comes at a challenging time for BT, which on Monday was hit by a record fine from the industry regulator, Ofcom, for failing to compensate rival broadband firms sufficiently over delayed installation appointments.


The accounting scandal in BT's Global Services unit, which emerged in January, triggered a £530m write-down - a development which shocked investors.





SKY    News.