London Stock Exchange switches auditing to EY

The London Stock Exchange has replaced its auditor for the first time since it became a listed company in 2001, the latest FTSE 100 mandate to change hands as the European audit market undergoes wide-ranging reform.

The UK exchange said it would drop PwC and replace it with EY after completion of the audit for the year ending March 2014.

James Chalmers, UK head of assurance at PwC, said: “We are in a new era, when tendering and switching of auditors is on the rise. This creates opportunities for all firms, including PwC, to work with new audit clients.”

Earlier this month, the EU audit reform package was adopted, aimed at shaking up the longstanding and cosy relationships between corporate clients and their auditors, some of which were accused of having their eye off the ball in the run-up to the financial crisis.

European companies will have to rotate their auditors every 10 years, with the option of tendering a mandate after 10 years and reappointing the same firm for an additional 10-year-period.

This has resulted in a merry-go-round of mandates between the Big Four accountancy firms. UK supermarket chain Wm Morrison said last week that it planned to appoint PwC as its auditor, to replace KPMG.

PwC also recently won high-profile audit mandates for HSBC, Vodafone and British Land, but in December lost its mandate with Unilever to KPMG.

Michael Izza, chief executive of UK accountancy body ICAEW, said: “Audit committees can clearly see the advantages of testing the market now and want to stay ahead of the curve before the EU requirements come into force.”