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February 19, 2013 9:11 pm
RSA, the FTSE 100 insurer, has hired KPMG to replace Deloitte as its auditor in a further sign of change in a notoriously static market that has come under fierce regulatory scrutiny.
It comes as the Competition Commission prepares to announce the provisional findings of its inquiry into the dominance of the four biggest audit firms: PwC, Deloitte, KPMG and Ernst & Young.
The RSA switch is likely to be seen by the “Big Four” as evidence that they compete fiercely for business. But it will do little to defuse claims that second-tier audit firms are being shut out of lucrative contracts.
Stretching back to 2007, the audit relationship between RSA and Deloitte is not long by the standards of the FTSE 100, where auditors can remain in place for decades or longer.
A survey conducted for the Competition Commission found that more than half of the index had kept the same auditor for more than 10 years. Before switching to KPMG, Schroders had used PwC and its predecessor firms since at least 1959.
Critics say such monogamous relationships undermine the independence of what is supposed to be an external check on management assertions.
RSA’s decision, which has not yet been announced, reflects a regulatory push to get companies to switch auditor more frequently, as well as a desire to use Deloitte for other advisory work, a person with knowledge of the situation said.
However, it was not linked to the recent arrival of Martin Scicluna, a former chairman of Deloitte’s UK arm, as RSA’s chairman, the person added.
The Financial Reporting Council, a UK regulator, recently called on companies to tender their audit contract at least once a decade. Some investors favour more aggressive action, while the European Commission has been exploring harsher measures.
RSA declined to comment, as did Deloitte and KPMG. Deloitte received £9.6m in fees from RSA in 2011, including non-audit services.
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