BT has replaced PwC with KPMG as its auditor following a fraud scandal at BT Italy in January which wiped £8bn off the company’s market value.
KPMG won its battle with EY for the audit tender, which will begin at the end of the current financial year, subject to a vote at the next shareholder meeting. BT was scheduled to change auditor by 2020 but moved the tender following boardroom fury over PwC failing to detect the lengthy fraud at BT Italy. Deloitte did not contest the contract as it already does technology consulting work for BT.
BT Italy inflated profits over several years through corrupt arrangements with clients and investors. The fraud was uncovered by a whistleblower and it has cost BT £530m through paying loans and cutting cash flow. The company suffered a huge drop in share price within one day, and lost 20% of its stock market value. BT chief executive Gavin Patterson’s pay package was slashed by £4m and 4,000 jobs were cut worldwide.
Bill Michael, senior partner elect at KPMG in the UK said: “We are delighted to have been selected to audit BT. Audit quality continues to be a key priority for audit committees, the investor community, regulators, the profession and society as a whole.”
It is the second FTSE 100 audit scandal to involve PwC in the past two years, the first being with Tesco.