Auditor faces the axe at Sainsbury

J SAINSBURY is considering sacking its long-standing auditor, Clark Whitehill, in the wake of its embarrassing entanglement in the Nicholas Young fraud scandal.

The supermarket group, which shocked the stock market on Friday by revealing it is losing market share, is reviewing pounds 200m worth of bought-in goods and services to see whether it could get better value for money.

For Clark Whitehill, losing by far its biggest and most prestigious audit client would be a bitter blow. A medium-sized firm, it earned pounds 1.2m in audit and other fees from Sainsbury last year.

KPMG Peat Marwick and Coopers & Lybrand are seen as front-runners to pick up the blue-chip account. Price Waterhouse, Arthur Andersen and Ernst & Young are handicapped because of possible conflicts of interest with existing audit clients - Tesco, Argyll Group and Asda respectively.

It is rare for a company the size of Sainsbury to be audited by an accounting firm outside the Big Six. Large corporations prefer the comfort and reassurance of using the biggest accounting and management consulting groups.

Clark Whitehill and Clark Kenneth Leventhal, the international grouping it belongs to, have been tarnished by the jailing in 1990 of Nicholas Young, a London-based CKL director, for swindling pounds 7.5m out of investors. He has since been released. Last month, Brian Worth, managing partner of Clark Whitehill, resigned from the ruling council of the Institute of Chartered Accountants after a ruling against him by the institute's disciplinary committee. It found he had not adequately supervised Young.

The victims of the conman, who bet the money on horses, are suing Clark Whitehill and CKL. Clark Whitehill denies any liability.

It is not clear whether the decision to review the auditing role was also triggered by Sainsbury's radical accounting changes, also revealed last week.

The company announced a pounds 365m write-down on properties and plans to depreciate its stores for the first time, falling into line with Tesco and others.

David Quarmby, joint managing director of Sainsbury, said the review of bought-in services would look at areas such as computers and distribution to see what savings could be made. He declined to comment on the question of auditors.

He confirmed there could be job losses as a result of a head-office review, as reported last week in the Independent on Sunday. The group was looking for 'efficiency gains' in the stores, but these could be achieved through normal staff turnover.

A spokesman for Clark Whitehill said it never commented on its clients. Any change in auditors would have to be approved by Sainsbury shareholders at the annual meeting in July.