The world’s biggest auditor is facing fresh questions over its independence after a powerful shareholder adviser warned of a possible conflict of interest in its relationship with Vodafone.
Sky News has obtained a report by Institutional Shareholder Services (ISS) highlighting PricewaterhouseCoopers’ (PwC) dual role as auditor to Vodafone and administrator to the collapsed British mobile phone retailer Phones 4U.
In the latter role, PwC has been drawing up plans to sue Vodafone and other mobile phone operators over their decision to stop supplying Phones 4U prior to its demise in 2014.
While ISS, which advises investors on voting decisions ahead of company meetings, has recommended support for PwC’s reappointment as Vodafone’s auditor at Friday’s AGM, it warns that the matter “will be kept under review”.
The situation “raises obvious concerns around conflicts of interest and auditor independence,” ISS’s report said.
“However, to its credit, the (Vodafone) audit committee has been proactive in addressing the issue head-on, consulting both with regulators and major shareholders when the issue came to light.”
Image: Phones4u collapsed in 2014 with the loss of thousands of jobs
A Vodafone spokesman said the FTSE 100 mobile phone group had taken robust steps to ensure PwC’s independence, including insisting on the physical separation between the audit team responsible for overseeing the company’s accounts and the Phones 4U administration team.
He added that confidential material was stored separately, with highly restricted access, and that “the lead Vodafone Group engagement partner is solely responsible for any audit implications of potential Phones 4U litigation”.
The measures, first outlined in Vodafone’s annual report earlier this year, underline the sensitivity of the distinct roles in which PwC now finds itself.
Ensuring the integrity of these dual roles has acquired particular importance for the professional services firm, which has been enduring a torrid time after a string of audit crises at other major clients.
PwC was recently informed by the Financial Reporting Council (FRC) that it was launching an inquiry into its auditing of BT Group following a £530m accounting scandal in its Italian operations.
The firm, which has since been sacked by BT and will be replaced with KPMG, has also faced an investigation into its auditing of Tesco – although the FRC ended its probe in June after concluding that there was no realistic prospect of a tribunal finding it guilty of misconduct.
Last month, PwC’s right to audit banks in Ukraine was removed after an alleged failure to identify improprieties at the country’s biggest lender.
PwC has also been fined multimillion pound sums for mishandling the audits of Cattles, a financial services group, and Connaught, a social housing maintenance firm which collapsed in 2010.
However, the FRC also found itself in hot water over the Connaught verdict when it emerged that one of the watchdog’s own members had leaked the news prematurely to secure favourable coverage.
PwC declined to comment.
Source: Sky