Ladbrokes has dumped its auditor as the bookie looks to close the gap on fierce rival William Hill.
EY has been replaced by fellow Big Four accountant PricewaterhouseCoopers (PwC). Ladbrokes has issued three profit warnings this year, the last of which in September saw shares slide 8 per cent .
William Hill also suffered in the third quarter of this year, but has outpaced Ladbrokes in the increasingly important digital division. While EY is not responsible for Ladbrokes’ financial performance, the move will be viewed as an attempt to regain City confidence.
PwC’s appointment, which will start for the 2014 financial year, is also the latest sign that big listed firms have listened to regulators’ concerns that they have far too cosy relationships with the accountants that look over their numbers.
The Competition Commission recently finalised a two-year inquiry that has sought to break the stranglehold of the four most dominant accountants, the other two being Deloitte and KPMG. This has led to an unprecedented number of audits being put out to tender over the past 12 months. Winning HSBC and Cairn Energy as new clients has boosted PwC’s coffers.
PwC chairman Ian Powell has warned, though, that such success cannot continue in a City environment that is now looking more carefully than ever at the role of the accountant. He told The Independent this autumn that it was “likely to lose” some big-name clients as a result of the regulator’s inquiry.
The competition regulator ultimately wants to see mid-tier bean-counters, such as BDO, Mazars and Grant Thornton, in contention for high-profile work. As the audit role is competed more regularly this should give them more opportunities to prove they can produce the same quality of work as the biggest accountants.
Ladbrokes said: “The decision was taken following a rigorous tender process and recommendation from the Audit Committee. The tender process was initiated in September 2013 as part of an ongoing emphasis on good corporate governance and best practice.”