Glaxosmithkline which is one of the largest pharmaceutical companies in the world announced that they are changing auditors from PwC to Deloitte.
Glaxosmithkline creates, develops and manufactures pharmaceuticals such as vaccines and over-the-counter medicines.
They are headquartered in London, UK. Their market capitalization is about $92 billion according to Yahoo Finance which makes them one of the largest companies in the world.
GSK announced this decision through a 6K SEC filing.
The 6k states that their intention is to appoint Deloitte as their auditor beginning with the financial year ending December 31, 2018.
This gives PwC two more years of audits. That’s only two more years of huge fees. Keep reading to learn how large the fees for this audit were.
GSK said this decision was made after a competitive bidding process. The decision was made by GSK’s Executive Steering Committee. The statement says that PwC was the auditor of GSK since 2001.
Why did GSK change auditors from PwC to Deloitte?
The UK and EU have regulations that went into effect this summer demanding public companies put their audits up for tender. This basically means that there is mandatory audit rotation in Europe.
The purpose of this rotation is to increase auditor independence. An auditor won’t waste time getting cozy with a client if they know they will lose them due to regulatory requirements. A professional relationship will be maintained.
What does this mean for PwC and the Big 4?
This is a huge loss for PwC and a huge win for Deloitte. GSK was the 6th largest audit fee in the FTSE 100.
The Glaxosmithkline audit amounted to 33.2 million pounds. As of the writing of this article, that equates to about $41 million US dollars.
PwC has also lost some other significant audits this year in Europe. They lost Legal & General to KPMG earlier this year. Legal and General was also part of the FTSE 100. Their audit was worth 7.2 million pounds. That is equivalent to $9 million US dollars. PwC also lost the Schroders audit earlier this year. That audit was worth 4.9 million pounds. That is equivalent to about $6 million US dollars.
Significant audits that PwC has lost this year in Europe
☠ Schroders $5 million
☠ Legal & General $9 million
☠ GSK $41 million
You add up all those lost audits, and you are looking at almost 60 million in lost revenue coming up for PwC. If you read our PwC revenue article, you’d know that PwC did not have a great 2016. Deloitte passed them as the number 1 accounting firm in the world. If PwC keeps losing audits in the UK and the EU, they are in for another bad year.
Now you might be thinking this looks terrible for PwC. You are right, but you also have to remember that there will be mandatory audit tenders for Deloitte, KPMG and EY as well. This means that PwC will pick up some of their audits. Make sure to subscribe to our newsletter to stay up to date on Big 4 auditor changes.