Hewitt faces storm over £13m fees paid to auditor by BNFL

By Jason Niss
Wednesday 01 January 2014 03:01

British Nuclear Fuels (BNFL), which last week recorded a £2bn loss, has paid around £13m to auditor Ernst & Young over the past three years, most of it for consultancy work.

The scale of the payments is in direct opposition to the stance taken by the Department of Trade and Industry, which owns all the shares in BNFL.

In a speech to the Cambridge Faculty of Law earlier this month, Trade Secretary Patricia Hewitt said: "We should look at the extent to which the audit firm should also be able to supply non-audit services to its audit clients."

A few days later, Melanie Johnson, the DTI minister involved in reviewing auditing practices, said in Parliament: "Relationships between auditors and clients can be too cosy and there is a need to demonstrate independence."

One of the key issues of the review, launched jointly by the DTI and the Treasury, is the amount of consultancy work taken on by auditors, and whether this influences them to be more lenient when reviewing companies' books.

The review followed the revelation that Andersen, the auditor to collapsed energy giant Enron, received more than $50m (£32m) from the company in one year, largely for consultancy work.

In the year 1999/2000, Ernst & Young was paid £1.07m for auditing BNFL and its subsidiaries but received £4.15m for "non-audit services".

In 2000/2001 the firm received £1.76m for its auditing and £3.03m for non-audit work. The figures for the last financial year, when BNFL recorded a loss of £2.09bn due to a £2.38bn reassessment of the group's nuclear liabilities, are not yet available. However, it is believed that the cost of the audit will exceed £1m and Ernst & Young will have also been paid at least £2m for non-audit services.

BNFL's books have been the subject of much critical comment from the accountancy profession and MPs, notably for its policy on dealing with nuclear liabilities and capitalising costs.

BNFL said it had no plans to change its policy on turning to Ernst & Young for non-audit work, explaining that it used the firm when "their expertise and experience are important or when they win work on a competitive basis".

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