FTSE 100 Hargreaves Lansdown (HL) Group has announced that it is replacing auditor Deloitte with PwC following a rigorous audit tender process.
The change comes amid pressure from regulators keen to see the audit market reform to the point that it is no longer dominated by the Big Four who currently audit 95% of the FTSE 350.
Last year the Financial Reporting Council (FRC) amended its UK Corporate Governance Code with the introduction of the comply or explain policy to compel firms to change auditor every 10 years or explain to the market why they would not.
The Competition Commission has also just issued draft proposals which could force an auditor tender process every five years while the European Commission has provisionally indicated moves to introduce mandatory auditor rotation once every 14 years.
The fund and investment services company's appointment of a new auditor follows a seven-year relationship with Deloitte whom it appointed in 2006. Its auditors before then were Ernst & Young (EY).
The annual audit fee reported in the 2012 annual report was £111,000, with £31,000 of additional non-audit related fees. HL did not use Deloitte for any non-audit related services.
Company CEO Ian Gorham said that the rotation of external auditors and advisers is an important part of the company's risk management strategy.
'The board recognises the potential familiarity risk of having the same auditors for a prolonged period and we felt that now was a good time to change. Deloitte has been the company auditor since 2006 and have provided an excellent service. We thank Deloitte on behalf of the board for the high quality of audit services provided. We look forward to working with PwC, who demonstrated excellent credentials,' said Gorham.
Gorham added that the company would prefer to have the flexibility to be able to change auditors when it makes sense and it wished to do so.
'However, any reputable company should review their audit arrangements regularly. The contribution and objectivity of an external auditor must surely reduce with time and familiarity, however good they are. That is just common sense. The idea that there can be some pride in saying "we have had the same auditor for 50 years" is ridiculous. Failing to seek fresh expert challenge should be a source of embarrassment. We believe new faces asking new questions are good news for clients, management, employees and shareholders,' he said.
Gorham gave a further vote of confidence in mid-tier audit firms - saying that firms such as Grant Thornton and BDO are highly capable and already advise many FTSE companies.
'In due course we would hope to see this experience come through and make these firms more prevalent in auditing FTSE companies,' he said.
HL's appointment of its new auditors has to be approved by shareholders at the company's AGM in October.
