FTSE 100 speciality chemicals group Johnson Matthey has appointed PwC as its external auditor following a competitive tender process, ending a 30-year relationship with KPMG
In a regulatory statement, the board said it has approved the proposed appointment of PwC for the financial year commencing 1 April 2018, subject to shareholder approval at the company's annual general meeting to be held in July 2018.
As first flagged in the 2016 annual report, Johnson Matthey’s decision to change auditor coincided with the end of Stephen Oxley’s term as current lead audit partner’s term ended after completion of the 2017/18 audit.
The timeframe was also driven by the requirements of EU audit regulations, adopted in the UK as the Audit Regulation & Directive (ARD) in June 2017, which mean the company would have had to change auditor by year end 31 March 2020.
When putting the tender out to audit, Ferguson Matthey did not ask KPMG to retender as they would have exceeded the mandatory 20-year limit on an audit tenure. All those tendering had ‘to confirm that they have not carried out any services for us which would cause an issue with audit independence and that they had processes in place to ensure their independence throughout the tender process,’ Johnson Matthey stated in the 2017 annual report.
‘In addition, we approved an interim policy on the engagement of those audit firms tendering to ensure they were not precluded from participating in the tender process and to avoid any independence issue arising in the run up to the appointment of a new auditor’.
KPMG will remain as the company's auditor for the financial year ended 31 March 2018. The firm, which first began auditing Johnson Matthey in 1986, was not invited to retender for the appointment, on the basis it had been the company’s auditor for more than 20 years.
According to the latest annual report, KPMG was paid a total of £2.8m in 2016/17, made up of £2.1m audit fees, plus £100,000 in additional audit fees and £600,000 for non audit services.
Alan Ferguson, chairman of Johnson Matthey’s audit committee, said: ‘The board would like to thank KPMG for its many years of service to the company and it looks forward to working with PwC in the future.’
Report by Pat Sweet, Sara White
