| 15.3°C Dublin

KPMG and ESB audit deal turns 89

Close

The ESB will have had the same auditor for nearly 90 years, after it extended its contract with KPMG until 2017 (Getty Images)

The ESB will have had the same auditor for nearly 90 years, after it extended its contract with KPMG until 2017 (Getty Images)

ullstein bild via Getty Images

The ESB will have had the same auditor for nearly 90 years, after it extended its contract with KPMG until 2017 (Getty Images)

The ESB will have had the same auditor for nearly 90 years, after it extended its contract with KPMG until 2017.

The utility has used KPMG and its predecessor firms as its external auditor since it was set up in 1927.

ESB re-hired KPMG after a tender process in 2012 on a three-year contract. However in a note to the ESB annual report for 2014, the company said it has exercised an option to retain KPMG for a further two years until the 2017 financial year.

The move means ESB will have had the same firm auditing its accounts for at least 89 years.

Crash

The length of KPMG's relationship with ESB is unusual in the business world, and has become more so since the financial crash of 2008.

While there is no legal requirement for ESB to change its auditors after a certain time period, it is recommended that companies rotate auditors every few years.

Most firms tend to rotate their audit contract among the "Big Four" of KPMG, Deloitte, EY and PwC.

In the private sector, the EU has proposed a "mandatory rotation rule" whereby an auditor may inspect a company's books for up to 10 years before the auditor must be changed. That limit may be doubled if a company carries out a competitive tender process.

Colin Feely, who is head audit partner with Grant Thornton, said pressure was growing on firms in general to rotate their auditor more regularly.

"The issues around audit reform is being driven mainly by the EU," he said.

"Apart from the perception that an auditor may be too close to a firm, there is also the potential for the auditor to sell other, non-accountancy services to a company.

"The auditor can see the issues facing a company much better than firms that aren't involved with a company," he said.

An ESB spokesman said the utility "tenders its annual audit contract at regular intervals".

"KPMG was appointed following a competitive tender process for a three-year period from 2012, with an option to extend by two years.

"This option was exercised in 2015. KPMG's appointment was in line with EU and state body guidelines.

"The next tender process for the annual audit will begin in 2016," the spokesman added.

In January Tesco changed auditors after 20 years with PwC. The retail giant has put out a tender for a new audit partner.

Irish Independent