Deloitte wins CRH role from Big Four rival

Big Four professional services firm Deloitte has secured a new contract as the external auditor of construction industry manufacturer CRH. The firm will replace rival EY in the role as of 2020.

Formed from a merger of Cement and Roadstone in 1970, CRH is an international group of diversified building materials businesses which manufacture and supply of a wide range of products for the construction industry. The company is incorporated and domiciled in Ireland, where it ranks as the largest Irish company.

Since 1988, the firm has been audited by Big Four firm EY; however due to the length of its tenure as well as the firm’s sizable non-audit work for CRH, it was decided the time was right to find a new auditor. In 2018 CRH paid EY £1 million in non-audit fees, representing 6% of the £17.2 million in total fees it paid to the Big Four firm for the year.

In its 2018 annual report, CRH noted that the audit committee conducted a competitive tender process in which three firms were invited to apply. EY was not invited to compete in the tender process, and eventually its Big Four rival Deloitte was chosen to replace the firm as external auditor for the FTSE 100 building materials provider. The evaluation was done on a “fee-blind basis”, in which fees are negotiated after the appointment has been decided.

The new contract for Deloitte will begin from 2020 onwards. According to CRH’s report, the decision is no reflection on EY’s performance as auditor, with the company stating this “did not compromise [EY’s] independence or integrity."

“[While] the Committee appreciated the quality of the proposals presented by all the firms, it believes that the strength and experience of Deloitte’s team best met the predefined criteria it had set,” the report added.

While it is common for Big Four firms to replace one another when it comes to large auditing contracts, the switch comes at a delicate time, when the domination of the market by the quartet is under intense scrutiny in the UK. Last year, the UK’s fifth largest accounting and advisory firm Grant Thornton withdrew from bidding for FTSE 350 audit tenders, which it claimed cost the firm as much as £300,000 an attempt, while rarely yielding a new contract. The move sparked multiple calls for a competition probe, with critics suggesting the Big Four’s stranglehold was compromising the integrity of the auditing industry.