Co-operative Group members voted to appoint Ernst and Young as the society’s new auditors. The Group’s board asked members to vote on the appointment following a tendering process. The motion was carried with 96.11%.
Due to legislative changes companies are required to tender every 10 years and change at least every 20 years in order to increase competition. At last year’s AGM some members have raised questions regarding KPMG’s involvement in advising the Group over the take-over of Britannia. However, member backed a motion proposed by the board to re-appoint the accounting firm. The council recommended supporting this motion, commenting that a tender process would be undertaken to select the Group’s auditors with effect from the AGM in 2016.
The Co-operative Group paid KPMG £700,000 in 2015 for auditing services and another £1.2m for advice, an increase from a total fee of £1.2m in 2014.
The Co-operative Bank has also ended its relationship with KPMG last year, when it changed its auditors to Ernst and Young.
In January 2014 the Financial Reporting Council has launched an investigation into the “preparation, approval and audit” of Co-op Bank’s accounts up to 2012. KPMG has been the Group’s and the Bank’s auditor for more than 30 years. It has advised the Bank and the Group on the takeover of the Britannia Building society and the aborted purchase of the Project Verde bank branches from Lloyds Banking Group.
A report by Christopher Kelly criticised KPMG for failing to discover problems within the bank that led to the Bank’s £1.5bn capital shortfall revealed in 2013. Previously wholly owned by the Co-operative Group, the Bank was bailed out by a consortium of hedge funds. The group maintains a 20% stake in the bank.
Sir Christopher’s report argued that KPMG’s due diligence on the Britannia deal was “broadly neutral, though it did warn about Britannia’s high-risk profile and exposure to sub-prime specialist lending and arrears in asset backed securities”.
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