EY has been selected by Royal Bank of Scotland to replace Deloitte as its auditor as of 2016. The decision follows new regulations that require companies to switch auditors every decade. As a result of EY’s new contract, the firm will overtake Deloitte’s third place in market share of FTSE 100 audits.
Earlier this year, Royal Bank of Scotland (RBS) put its external audit contract up for tender to replace Deloitte, who had been appointed by RBS’s former CEO Fred Goodwin in 2000. Following a comprehensive tender process, overseen by RBS Non-Executive Director Brendan Nelson, the bank has decided to sign professional services firm EY as its new audit partner from 2016 onwards.
RBS was obliged to find a new auditor following new rules that force companies to change auditors every 10 years. These rules have led to a massive change of audit contracts in the industry. Recently Barclays for instance announced it will replace PwC, who has been its auditor for 118 years now, and HSBC has replaced KPMG, serving the client since 1991, with PwC.
Commenting on EY’s appointment the bank says: “RBS has now completed a comprehensive process, overseen by the Audit Committee, which carefully evaluated the offering of each proposing firm, which resulted in a recommendation which has now been endorsed by the RBS board.”
As a result of the appointment, EY will overtake Deloitte’s third place in market share by number of FTSE 100 audits, just behind market leaders PwC and KPMG. For EY it provides a welcome boost to its operations, the accounting and consulting firm has invested heavily in its Audit Practice in the UK in the past years, on top of that banks are notorious for being some of the most lucrative audit clients due to their size and complexity.