BSkyB, the satellite TV group, is to come under pressure from shareholders to justify its reliance on Andersen, the accountancy firm at the centre of the Enron scandal.
The Independent on Sunday has discovered that in the past five years, BSkyB has paid Andersen £24.2m for non-audit services, 12 times the amount it has spent on auditing.
In the same period, News Corporation, which owns 36 per cent of BSkyB and whose chairman, Rupert Murdoch, is also chairman of BSkyB, paid A$114m (£42m) to Andersen. Of this, A$44.2m was for auditing the vast News Corp empire and A$69.8m was for other services, largely tax and corporate finance advice.
News Corp is believed to be one of Andersen's largest clients and BSkyB is the firm's biggest corporate customer based in the UK. And BSkyB's considerable payments to Andersen have accelerated over the past few years. In the 12 months to 30 June 2001, the company paid Andersen £600,000 for auditing its accounts, and £13.8m was spent on other services.
Of this, £600,000 was on tax advice, £6m on programming the company's websites, £4.9m on assistance with developing call centres, and £2.3m on other consulting services. In 1999/2000 BSkyB paid £400,000 for auditing and spent £5.7m on other services from Andersen. In 1998/9, BSkyB paid Andersen £400,000 for auditing and £2.4m for other services, principally on the aborted bid for Manchester United FC.
Investors are concerned about the level of non-audit fees paid to auditors in the wake of the Enron scandal. Enron paid $52m (£26m) to Andersen in its last financial year. Andersen is expected to face a lawsuit claiming up to $1bn damages from investors in Enron, which collapsed in December. This could have an impact on partners of Andersen in the UK because they are jointly liable in the firm's partnership structure.
Andersen has also been called to testify to the US Congress, which was alarmed by reports that the firm's Houston office has been shredding documents related to Enron. David Duncan, the head of Andersen's Houston office, has pleaded the fifth amendment to avoid answering questions by US law makers.
The Association of British Insurers is reviewing its guidelines on the amount of non-audit work done by auditors, and is expected to put pressure on the audit committees of quoted companies to make sure there is no potential conflict of interest.
Michelle Edkins, head of corporate governance at Hermes, the fund manager, said it was concerned about the amount of consultancy work done for BSkyB by its auditors.
The chairman of BSkyB's audit committee is Philip Bowman, chief executive of Allied Domecq. He is not prepared to discuss the Andersen issues. Also on the audit committee are Allan Leighton, who last week was appointed chairman of Consignia; John Thornton, a director of Goldman Sachs, which does millions of pounds of work for News Corp and BSkyB every year; and two News Corp executives, David DeVoe and Arthur Siskind.
A spokesperson for BSkyB said the company was "pleased" with the work done so far. A spokesperson for News Corp would not comment on Andersen.Reuse content