Energy giant Cairn is to drop its auditor Ernst & Young and has now hired PwC to conduct its external audit.

In an announcement contained within its preliminary results announcement, Cairn said it had competitively tendered its external audit service contract and as a result, PwC had been selected by the board as the company's auditors.

E&Y had been the incumbent auditor since the energy company first listed in 1988.

The FTSE 250's decision to replace its auditor also comes amid a shake-up in the statutory audit services market following concerns that Big Four firms have a stranglehold on the market, along with worries about overly long auditor tenures which shareholders have said could cause auditors to serve management instead of company owners.

'Ernst & Young will consequently resign their position as auditors on completion of their work for this year end PwC will be appointed by the Board to commence their engagement from this time,' Cairn said.

The change in external auditor comes as the group announced profits for the year ended 31 December 2012 had dropped to $72.6m, from $4,565m for 2011.

In its 2011 accounts, the company recorded E&Y's audit fee at $224,000 (£148,000) for the audit of the group's annual account while fees for the audit of the company's annual account was $26,000.

E&Y additionally received just over $1m for additional work which included the audit Cairn subsidiaries, services related to taxation, advisers' fees for taxation work and work relating to corporate finance transactions.

'The board would like to thank Ernst & Young for the excellent services provided to the Company over many years up to and including the 2012 year end audit,' the company said.

Shareholder approval will be sought at the AGM to formally appoint PwC as the company's external auditor.