NAO takes over from EY as BBC auditor

In its Annual Report and Accounts the BBC has confirmed the end of its relationship with EY as the broadcasting corporation’s official auditor. The National Audit Office and Sir Amyas Morse will become their external auditors for the financial year 2017-2018.

EY, who only took over as the BBC’s external auditors in 2015, initially signed up for the duties on a three-year basis. The BBC audit is worth around £1.6 million, including the audit of the BBC’s annual accounts, the audit of subsidiaries of the BBC and audit-related assurance services, and will be regarded as a significant loss to EY’s annual portfolio. The BBC could have stayed with the professional services and audit advisory for a further two years, but instead opted to seek the services of the National Audit Office, as part of the media giant’s bid to further improve their organisation's value for money, having come under fire recently for arguably overpaying top televisual talent.

The National Audit Office (NAO) will fulfil the responsibilities of external auditor over the course of the current and following year. Before EY, BBC was audited for 18 years by competitor KPMG, a fellow Big Four member. The gang of four, also including Deloitte and PwC, have recently come under increasing scrutiny regarding their auditing practices, with the consulting firms providing auditing services for all bar 10 of the companies in the FTSE 350. The ranking, made up of the world’s largest companies in terms of capitalisation, had global combined sales which totalled some €120 billion last year alone.

A recent paper commissioned by Members of European Parliament called for regulators to step up their bid to clamp down on the facilitation of global tax avoidance by the Big Four accountancy practices in the wake of the “Panama papers” scandal. Meanwhile, EY have been involved in a number of disputes regarding the investigation of their auditing work, the most recent of which came when the Capital Markets Authority in Nigeria announced it was set to probe EY in relation to their work with the country's troubled Uchumi Supermarkets. This after the Nigerian high court dismissed the application filed by EY barring investigation.

There has been a significant decline in EY’s audit as well as their non-audit performance in the UK, displaying a drop from £2.1 million to £2 million over the past 12 months, which suggests the implications may have begun to have an impact on their usually lucrative line of work. A new charter presented by Karen Bradley, Secretary of State for Digital, Culture, Media and Sport, revealed a switch in leadership.

Commenting on the new guidelines, Bradley said, “The charter will enhance the NAO’s role and access – and allow it to conduct value-for-money studies on the BBC’s commercial subsidiaries. This money subsidises the licence fee, so the public has every right to expect value-for-money.” For the past 10 years the NAO has produced reports for BBC regarding the workforce and financial data, indicating that the NAO had been familiar with the behind the scene workings of BBC. NAO has also had experience with auditing BBC’s licence fee revenue statement, which illustrates how much was collected by the BBC and how much was given to the government.