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source from：FT
Hollywood gives a second chance to comeback kids at PwC
Group’s ties with Oscars and BT sheds light on challenges of changing auditors
The Top Line
9 HOURS AGO by: Brooke Masters, Companies Editor
Love may mean never having to say you are sorry, but keeping a client requires a different approach.
Accounting giant PwC seems to have learnt that lesson all too well. Last month, one of its partners drew international opprobrium for mixing up the envelopes at the Oscars and causing the wrong film to be announced as best picture. The embarrassment was compounded by the revelation that he had been tweeting from backstage just minutes before he made the mistake.
But this week, the Academy of Motion Picture Arts and Sciences announced it had decided to stick with PwC for the Oscar voting process as well as its own taxes and auditing. Academy president Cheryl Boone Isaacs wrote in a letter to members that PwC’s mistake was “unacceptable” but the firm had “taken full responsibility” and laid out a series of reforms to prevent a repeat. Among other things, PwC brought back a partner who had done the job before — “flawlessly” the letter noted — and said it would ban cell phones at the ceremony. It also promised that its US chairman would take a more hands-on oversight role. The comprehensive improvement plan — and probably some grovelling behind the scenes — appears to have salvaged the 84-year-old relationship.
The same cannot be said for another long-term PwC relationship. BT is pushing ahead with plans to replace PwC with a new auditor after more than 30 years. The move was originally planned for 2019 but was accelerated after the UK telecoms group revealed its second accounting scandal since 2008. Now BT’s audit committee has written to the accounting watchdog, the Financial Reporting Council, about the replacement process, according to people briefed on the matter.
BT is actually behind the curve on this issue. The FRC added the principle of regular auditor rotation to its corporate governance code in 2012. More than 150 members of the FTSE 350 have responded by putting their contracts up for bid since then, according to FRC statistics. More than two-thirds of those competitions have led to the hiring of a new auditor.
A similar process is likely to happen across Europe in the wake of a new EU law that requires public companies to tender their audits every 10 years and hire a new firm at least every 20 years.
But if experience is any guide, the results will be far from revolutionary. Big companies with business all over the world generally prefer auditors that are similarly global. That makes them reluctant to look beyond the Big Four. In the UK, for example, PwC and its three peers audit 99 of the FTSE 100, and 96 per cent of the somewhat less global FTSE 250. So auditor rotation is more like a game of musical chairs than a true changing of the guard. Further complicating the matter are conflict of interest rules that prevent companies from using their auditor to provide substantial non-audit business, such as big IT or consulting contracts.
BT’s search for a new auditor to replace PwC highlights the problem — its outgoing chairman formerly headed KPMG, and both EY and Deloitte are said to be already doing non-audit work. BT could take a risk and hire one of the next largest firms. More likely it will chose to wait until one of the conflicts can be unwound.
Suddenly the Academy’s enthusiasm for kissing and making up with its vote-counting partner does not seem so unusual. Hollywood does love a happy ending.
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