KPMG will not re-pitch for the audit of Aston Martin just months after the luxury car manufacturer carried out a £4bn float on the Stock Exchange, as regulatory pressures begin to warp the relationship between the Big Four and their major corporate accounts.
The professional services firm declined the opportunity to comment on the matter to AccountingWEB, as the car maker said the re-tendering process was not down to any unhappiness with KPMG’s work, according to Sky News.
KPMG has audited Aston Martin since 2007, and the pair were all smiles during the British manufacturer’s October 3 IPO.
Aston Martin, famed as the vehicle of choice for Ian Fleming’s iconic fictional spy James Bond, announced plans to put its 2019 audit out for tender when it released the IPO prospectus.
The significant decision not to re-pitch such a major account in the months following an IPO arrives at the start of a pivotal time for the Big Four accounting firms, who are gearing for a swathe of regulatory changes following years of scandal and criticism.
Although they appear to have escaped the threat of break-up for now, a major review of the profession by the Competition and Markets Authority (CMA) concluded audits of the UK’s FTSE 350 companies should be carried out by at least two firms, one of which should be from outside the quartet of KPMG, Deloitte, EY and PricewaterhouseCoopers.
Currently, the four firms conduct 97% of big companies' audits while also providing them with consulting and other services such as data analytics, as KPMG did with Aston Martin’s rival McLaren until the Formula 1 team terminated a 10-year partnership just three years in.
The CMA hopes opening up the market will give smaller accounting groups access to larger clients, allowing them to develop their skills.
It appears the threat of action is already enough to set change in motion, as experts told AccountingWEB last year when the four firms began to separate audit and consulting ahead of any formal rule change.
The split between KMPG and Aston Martin follows a parting by Vodafone and PwC in December over a potential conflict of interest issue in the administration of mobile phone retailer Phones 4U.
KPMG and its ilk are also likely to be answering to a new accounting regulator sooner rather than later, as the abolition of “toothless” Financial Reporting Council (FRC) appears increasingly likely following independent review.
The beleaguered regulator was heavily criticised for clearing KPMG of any wrongdoing following an investigation into books of lender HBOS. The auditor had given the bank a clean bill of health shortly before HBOS collapsed and was subsequently bailed out by the government.
At Aston Martin, a search for new auditors is underway, and will be carried out by the car maker’s audit committee, whose chairman, Richard Solomons, qualified as a chartered accountant with KPMG in 1985. Solomons then took the role of chairman at Intercontinental Hotels Group from 2011 to 2017, before becoming appointed chairman of the Aston Martin board prior to the IPO.
Aston Martin announced a loss of £163m in 2016, before a major turnaround in 2017, leading to a full-year pre-tax profit of £87m. It announced plans for an initial public offering in August 2018, to float on the London Stock Exchange as Aston Martin Lagonda Global Holdings plc.
A disappointing first day of trading ended with a failure to hit the £5.1bn target, as the listing touched £4.33bn, and shares have plummeted more than 25% since 3 October.