New Telecom auditors named after scandals

By IRENE CHAPPLE

Telecom has pulled its multi-million dollar auditing account from PricewaterhouseCoopers in response to the wave of overseas accounting scandals.

Telecom will continue to use PricewaterhouseCoopers for its non-audit services, but has passed the auditing over to KPMG.

In the 2001-2002 financial year, Telecom spent $2 million on audit fees and $3 million on non-audit, which includes tax and financial advice.

The decision to split the services reflects concerns highlighted in the bankruptcy of US energy giant Enron.

It was being audited and advised by former accounting giant Andersen, now embroiled in a legal suit over its liability.

Several United States corporates have since admitted accounting irregularities, with the close relationships of auditors and consultants coming under scrutiny.

Telecom spokesman Andrew Bristol said the company had no problem with its present auditors, but had made the change "to enhance our reputation".

The altered policy, put in place since the United States' scandals had been uncovered, was made to maintain audit independence, both in practice and public appearance.

Bristol said Telecom - which is 50 per cent US owned - did not make the change after pressure from shareholders.

While it was expected to provide further assurance, "this is something we've done on our own volition, ahead of what we believe may change".

He also said the brief probe by the Securities Commission into Telecom's accounts this year was not a factor in the decision, because the company had been cleared.

The securities watchdog looked into the accounts in February but declared them clean within a week.

PricewaterhouseCoopers' leader assurance and business advisory, Warwick Hunt, said it was unlikely other companies would follow Telecom's lead.

Telecom's high level of shareholdings in the United States and its focus on the scandals meant Telecom felt it necessary to make the split, said Hunt.

The loss would not result in redundancies, although staff would have to be reassigned.

The overseas scandals have also prompted PricewaterhouseCoopers - with other accounting firms - to spin off the main consulting arms.

PricewaterhouseCoopers' offshoot, named on Monday, will list on the New York stock exchange next month. PricewaterhouseCoopers is running out its present contracts, but it will not accept major consulting projects from an audit client once Monday is operating.

The Institute of Chartered Accountants is also preparing a green paper on the profession's standards which will be issued next month.

Institute president Ralph Marshall said that, while New Zealand's accounting standards were regarded highly, the need for tougher standards was being discussed with the Government.