News
Julia Irvine 15 May 2017 12:32pm

BAE Systems to replace KPMG with Deloitte as auditor

FTSE 100 company BAE Systems has called time on auditors KPMG after 36 years and appointed Big Four rival Deloitte in its place, subject to shareholders’ approval at the AGM in May next year

The firm, which was not invited to join the formal tender process, will remain the group’s auditors for the financial year ending 31 December 2017.

The decision to change auditors was made in the light of the Audit Regulation and Directive which last year introduced mandatory tendering and rotation of auditors.

During its time as auditors to the global defence, aerospace and security giant, KPMG has had a rocky ride on occasions. Four years ago, the Financial Reporting Council dropped an investigation into audits and professional services advice provided by the firm to British Aerospace/BAE Systems between the years 1997 to 2007.

The FRC had started to investigate KPMG’s role as auditor in the wake of BAE’s decision in 2010 to strike a deal with US and UK authorities and bring to an end their eight-year probe into corporate bribery.

Under the settlement, the group paid out a record fine of $400m (£309.4m) and pleaded guilty in the US to a charge of conspiring to make false statements to the US government in connection with payments made when trying to win business. It also pleaded guilty to a lesser charge in the UK of failing to keep accounting records.

However, after three years, the FRC announced it was closing the investigation on the grounds that proper assessment of KPMG’s conduct would require consideration of work undertaken in earlier years and, since there was no realistic prospect of a tribunal making an adverse finding on work done so long ago, it would not be in the public interest to extend the investigation to years before 1997.

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