Standard Chartered looks set to dump KPMG as its auditor after four decades of checking the bank’s books, as the seemingly cosy relationship between big business and their accountants is smashed in the wake of the financial crisis.
The bank is putting the audit role out to competition in a move which will be seen as a victory for Pirc, the shareholder governance lobbying group.
Last year Pirc called for KPMG to be sacked after alleging that the accountant had allowed Standard Chartered to overstate the strength of its 2011 accounts by $3.6bn (£2.3bn). KPMG earned $18.7m last year.
The news comes just two months after the New York-based advisory arm of Deloitte was fined $10m for its role in Standard Chartered’s breach of US sanctions against Iran.
The Big Four accountants – the other two are Pricewater- houseCoopers (PwC) and EY – have been widely criticised for failing to spot the warning signs of the global financial meltdown that started in 2007.
Critics believe that the Big Four’s long-standing relationships with the banks prevented them from being objective.
Fears over these relationships have sparked regulatory reviews into audit at both domestic and European Union level.
The Competition Commission is demanding that it becomes mandatory for FTSE firms to re-tender their audit work every five years in the hope of encouraging mid-tier accountants to break the Big Four’s stranglehold of the market.
Standard Chartered has sent out what is known as a “request for proposal”, which essentially kick-starts the bidding process.
KPMG will be allowed to re-pitch but will be nervous at the prospect of losing the work so soon after it was ousted by PwC as auditor to HSBC, the most lucrative account in the country with fees of £53m-a-year and a role that the accountant had held since 1991.
A spokeswoman for Standard Chartered confirmed that the bank is “in the process” of putting the audit role out to tender. Pirc described the tender as “a positive”.
KPMG declined to comment.