Rival attacks PW over low audit fee

BDO Stoy Hayward, the accountancy firm, has made an unprecedented public attack on Price Waterhouse, one of the big six practices, accusing PW of predatory pricing in replacing Stoy as auditor of the Royal Automobile Club.

Stoy is using the rarely employed legal right to address RAC shareholders directly, and urge them to reject the proposed change of auditor at the club's annual meeting on 17 May.

In a letter sent to all the RAC's 13,000 voting shareholders this week, Stoy claims that PW is prepared to take a loss on its £160,000 audit fee in order to win lucrative tax and management consultancy work from the RAC. Stoy's bid was £250,000.

Stoy questions whether PW will be able to provide "the independence and objectivity" required of auditors by charging such a low fee. It also points to the rising rate of litigation against the big auditors and their difficulty in finding affordable professional indemnity cover.

Stoy said yesterday it had decided to make a stand over the issue of "low-balling", which it claims is increasingly used by the big six to poach audit work from their smaller brethren.

Such highly competitive tendering was rare before the recent recession, but intense competition and the decline in consultancy work has led to open scrapping over the more or less fixed pot of audit work.

The issue is a raw subject among medium-sized accountancy firms, which feel they are being squeezed out by unfair practices. A spokesman for Robson Rhodes, another medium-sized firm, commented: "Low-balling endangers the whole of the profession and may lead to a lowering of standards."

Price Waterhouse and the RAC have sent separate letters to shareholders. PW says it "wholly rejects the allegations and innuendo in the BDO Stoy Hayward letter sent to RAC members".

Stoy claims that PW's price would translate into an hourly rate of £53, which would not even cover wage costs. "It's a rock-bottom rate," a Stoy source said yesterday.

PW states in its letter that Stoy's estimate of a £53 hourly rate is incorrect. "PW is confident that the fee quoted to the RAC will cover a thorough audit, using the advanced and efficient audit techniques which are a hallmark of PW," the firm said.

The firm denied there was any possible conflict of interest with winning further consultancy work from the RAC, and said its professional indemnity insurance was more than adequate.

The RAC, which runs a club in Pall Mall and another in Epsom, appears bemused by the sudden outbreak of audit wars. Its own letter to shareholders comes down firmly on the side of Price Waterhouse.

"PW were selected because a rigorous appraisal showed them to be the best-equipped to meet our needs. The substantially lower PW audit fee was a secondary, though worthwhile consideration."

The Institute of Chartered Accountants in England and Wales, the auditors' professional body, is thought likely to keep its head beneath the parapet in the dispute. Smaller firms form the bulk of its membership, and are increasingly vocal in attacking perceived anti-competitive practices by the big firms.

The RAC said that two other firms among the big six, Arthur Andersen and Ernst & Young, also tendered fees of below £200,000, against Stoy's £250,000.

Start your day with The Independent, sign up for daily news emails
A poster by Durham Constabulary
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine