Fund manager Schroders is to review its 50-year relationship with auditor PwC, after confirming that it is tendering the contract for audit services at the firm.
The company's retendering of its audit contract - for which PwC was paid £3.1m in 2011 - is an indicator of a shift in boardroom thinking around relationships with external auditors amid pressure from investors who want reform of the perceived 'cosy' relationships between external auditors and company management in the interests of independence of external auditors, so as to promote audit quality.
A spokesperson at Schroders said: 'We can confirm that we have put the audit out to tender but as the process is on-going we are unable to comment further. The firm sees this as good governance; however, it is mindful of impending regulatory change.
In its accounts for the 2011 year end, Schroders warned that while the quality of PwC's work as auditors supported them being awarded the 2012 audit contract, regulatory changes could require compulsory tendering and/or rotation of auditors.
'Consequently the committee will revise its process of assessment for the 2013 audit to include a review of the credentials of other providers,' the audit committee said.
PwC's total fees amounted to £4.7m (2010: £4.4m) of which £2.7m (2010: £2.6m) was for the audit, £0.4m (2010: £0.4m) was audit-related and £1.6m (2010: £1.4m) was for non-audit related work, including the preparation of the internal controls report and other non-audit services including tax, compliance and regulatory opinions for group subsidiaries.
The percentage of non-audit to audit fees to total fees was 43% (2010: 41%).
Schroders audit committee has also approved the process for reviewing the performance of PwC as external auditors following internal analysis through a detailed questionnaire completed by Shroders' employees who interacted with the auditors in executive and non-executive capacities around the world. The results of the questionnaire indicated that PwC's standards were considered high.
Earlier this week Eddie Stobart awarded its audit contract to KPMG - previous auditor, Ernst & Young, had handled the audit business for 10 years since 2002.
The moves come as the Competition Commission today published evidence of a low rate of tendering - on average only 3.3% of FTSE 350 companies switched auditor between 2000 and 2011, with the average tenure of 11 years. Among FTSE 100 companies the switching rate is lower at 2.4% a year over the same period and an average tenure of roughly 13 years.
The change of auditor at Schroders also follows regulatory changes expected from the European Commission which will debate audit reform plans on 8 October in Brussels, including the frequency of tendering.
Initial recommendations called for a change of auditor every six to nine years but draft proposals which watered this down to once every 25 years, although this has been criticised by investors.
Final recommendations will most likely emerge next year, after the UK's Competition Commission issues a report on its findings this November.
The Financial Reporting Council is also expected to shortly recommend that companies in the FTSE 100 and FTSE 250 put their audit contracts out to tender at least once a decade or explain to shareholders why they have not done so.
