WH Smith has become the latest FTSE company to switch auditors, after a formal tender process saw PwC appointed statutory auditor, ending the company’s 65-year relationship with Deloitte.

The retailer said the appointment is subject to approval by shareholders at the AGM on 21 January 2015.

Deloitte has audited WH Smith since 1949 and was paid a total of £300,000 in audit fees plus £100,000 for non-audit services last year, according to the retailer’s 2013 annual report and accounts.

WH Smith audit committee chair, Suzanne Baxter, thanked Deloitte for their contributions as auditors for the company.

‘We look forward to working with PricewaterhouseCoopers going forward,’ she said.

Separately, Deloitte has also been replaced as auditors to Arrow Global Group, a debt recovery company which made its stock market debut in October last year, as KPMG now takes over as the statutory auditor for the year ending 31 December 2014 following a competitive tender.

According to Arrow’s 2013 annual report, Deloitte was paid £134,000 in audit fees for the year, and a total of £1.547m in fees for non-audit services, which it said was ‘exceptional’ and largely the result of one-off projects related to its flotation.

The report stated that other providers were considered, however ‘it was felt that Deloitte were best positioned to provide the services required, from their knowledge gained as external auditor, without compromising independence.’

In its annual report, Arrow also noted that’ the length of tenure of auditors has been a topic of much debate recently. It is mindful of the Code requirement that, for FTSE 350 members, the external audit contract should be put out for tender every 10 years and that even though the company is not yet a member of the FTSE 350, voluntary compliance with this aspect of the Code represents best practice.’

The company said that this, coupled with the need to review the level of non-audit fees, the recent IPO of the company and the required rotation of the audit partner at Deloitte had contributed to the decision to put its audit out to tender.

Following the announcement of KPMG’s appointment, in a statement, Arrow Global Group said: ‘Deloitte has been the Group’s auditor since 2009 and the board would like to thank Deloitte for its contribution.’

Royal bank of Scotland set to retender £29m audit

Royal Bank of Scotland (RBS), the UK’s largest taxpayer-owned bank, has indicated it is to put its external audit out to tender.

The bank’s AGM, held last month, confirmed the re-appointment of Deloitte until 2016 but its annual report indicated plans to put the contract, for the audit of the Group, out to tender later this year. The process is expected to take at least three months.

Deloitte has been the company’s auditor since March 2000, when the firm replaced PwC. According to the 2013 annual report, Deloitte was paid a total of £29.9m in audit and audit-related assurance services fees last year. In addition, Deloitte received £3.6m for other services, compared with £9.7m in equivalent payments the year before.

RBS said that in putting its audit out to tender, it was taking into account the requirements of the UK corporate governance code, as well as the findings of the Competition Commission’s inquiry into the statutory audit services market and emerging developments in the EU regarding best practice in audit rotation.

RBS reported a pre-tax loss of £8.24bn for 2013, with a group operating loss of £2.30bn.

FRC seeks comments on ISA changes to disclosures

The Financial Reporting Council (FRC) is asking for feedback on the recently issued IAASB Exposure Draft of proposed changes to several International Standards on Auditing (ISAs) that address disclosures in the audit of financial statements.

The proposals include new guidance to clarify expectations of auditors when auditing financial statement disclosures.

The FRC has issued an invitation to comment which highlights the main proposed changes and describes the background to them. The regulator says it welcomes comments on the IAASB’s exposure draft in order to assist in developing a response to the IAASB. It will also help the FRC in developing proposals to adopt the proposed changes to update the corresponding ISAs (UK and Ireland) when the changes to the ISAs are finalised.

The FRC is asking for comments from interested parties by 1 August 2014 and is also encouraging them to comment on the exposure draft directly to the IAASB before its deadline of 11 September 2014.

Details available are on FRC website at http://bit.ly/1jmw7Bu

Deadline reminder for auditors to amend tax contracts

The Financial Reporting Council (FRC) is reminding audit firms that the deadline for terminating or amending contracts for tax services provided on a contingent fee basis is 31 December 2014.

This requirement is as a result of changes to Ethical Standards for Auditors, effective from December 2010, which prohibited audit firms from undertaking any tax services on a contingent fee basis for companies that they audit, where the outcome is dependent on the proposed application of tax law which is uncertain or has not been established.

The revised ethical standards contained a transitional provision permitting firms to continue with such engagements until the earlier of the completion of the engagement or 31 December 2011 as it became clear that many firms would be likely to have a number of uncompleted engagements of such a nature. In November 2011, following consultation, the transitional period was extended to 31 December 2014.

The FRC highlights that the 31 December 2014 deadline is not being reviewed and that, where applicable, auditors will need to have undertaken the necessary steps to terminate or amend such contracts, or to take other appropriate action so as to remain compliant with the Ethical Standards for Auditors, by the year-end deadline.

Internal auditors need to improve company ethics standards, says IIA

The Chartered Institute of Internal Auditors (IIA) is calling for companies to take concrete steps to audit their corporate culture and behaviour in the wake of a string of recent scandals across several sectors, and says internal auditors have a key role to play in improving organisational ethics.

Dr Ian Peters, the IIA’s chief executive, said: ‘As organisations come under increasing pressure to demonstrate their commitment to improving standards of behaviour they must focus more closely on getting the underlying culture, which dictates those behaviours, right. But on the basis that what gets measured gets done, they must take seriously the need to audit their progress in addressing the need for change.’

The report calls for internal auditors to go beyond a focus on processes and controls, and undertake root-cause analysis

The institute says there have been a number of recent examples of unacceptable activities, including the rigging of LIBOR rates and PPI mis-selling within the financial services sector, concerns over media ethics raised during the Leveson inquiry and the failure of some healthcare providers to adopt the right culture of care.

In a report, Culture and the role of internal audit – looking below the surface, the IIA says boards in the public and private sector need to tackle these failings by clearly defining and communicating the culture they require to produce the behaviour needed to meet their company goals and manage the risks. They also need to put in place policies and systems that can be measured and work much more closely with their internal auditors to monitor and report on those measures.

The report calls for internal auditors to go beyond a focus on processes and controls, and undertake root-cause analysis to identify cultural weaknesses. They should also audit cultural indicators to gather evidence on how far culture and values are at the heart of business decisions. This should include evaluating indicators such as recruitment policies, training, performance management and reward.

In addition, the IIA says that internal auditors need to assess and audit not just the tone at the top of a company, but throughout the organisation.

The complete report can be downloaded from the IIA at www.iia.org.uk/culturereport