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PwC dropped as auditor by British American Tobacco

05 March 2015

PwC dropped as auditor by British American Tobacco - Read more

PwC has been dropped as auditor by British America Tobacco (BAT) as the accounting giant may be sued by a Group subsidiary.

The proposed litigation by a Group subsidiary and the potential claims against PwC arose from work carried out in relation to the audit of the accounts of a third party.

BAT has commenced a competitive tender process to appoint new external auditors for 2015 onwards – PwC was the tobacco firm’s auditor since it listed on the London Stock Exchange in September 1998.

According to BAT, PwC has completed its audit of the company’s 2014 financial statements and will not seek re-appointment as auditor at the 2015 AGM. A resolution at the AGM will ask shareholders to confirm the appointment of the successful firm following the tender process.

The other three firms that make up the Big Four group, Deloitte, KPMG and Ernst & Young, have been invited to take part in the tender process – BAT states that the narrow invitation group is because of the scale and global footprint of the company.

Under fire from all sides

The last few months have not proved to be the best for PwC as it has found itself being investigated by regulators and government agencies such as the Securities and Exchanges Commission (SEC), the Public Accounts Committee (PAC) and the Financial Reporting Council (FRC).

The SEC imposed sanctions against the China-based ‘Big Four’ accounting firms for refusing to hand over documents related to investigations of potential fraud, which includes PwC’s China operations.

The PAC accused PwC of promoting tax evasion of an industrial scale and stated that the tax arrangements PwC promotes are based on artificially diverting profits to Luxembourg through intra-company loans.

The FRC’s first investigation looked into PwC’ role as Barclay’s’ auditors in reporting to the FSA on the bank’s compliance with the FSA’s client asset rules.

The second investigation looked into PwC’s work as the auditor of troubled retail giant Tesco.

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