PwC Withdraws from NAB Auditorship, Narrows Two-Horse Race

After being ensnared in the National Australia Bank controversy, PricewaterhouseCoopers has officially withdrawn from the contest to become NAB's new auditor. This decision follows the bank's and accounting giant's earlier conclusion that PwC's dual role as external auditor and provider of other services for the bank would not be in the best interest of their relationship. With KPMG being dropped from the job halfway through its contract, the remaining competitors are Ernst & Young and Deloitte, setting the stage for a two-horse race. Ernst & Young, with a financial services practice of 400 people nationwide, would need to augment its Melbourne operations and bring in partners from interstate and overseas to tackle NAB's audit.

Key Takeaways:

• PricewaterhouseCoopers (PwC) has withdrawn from the contest to become National Australia Bank's (NAB) new auditor due to concerns about independence and potential conflicts of interest.
• The decision leaves Ernst & Young and Deloitte as the sole competitors for the job, creating a two-horse race.
• Ernst & Young would need to duplicate its existing capability and bring in additional resources to audit NAB, the country's largest bank.
• PwC's withdrawal was expected, as NAB chairman Graham Kraehe had already stated that PwC was unlikely to win the external audit job.
• The audit independence debate has narrowed the audit options for other large Australian companies grappling with governance questions.
• PwC received $12 million in fees from NAB last year and $220 million in revenue from the financial services sector in 2003, accounting for almost 27% of its revenue.
• The firm's investigation of the NAB foreign exchange debacle was criticized due to potential conflicts of interest.

Statistics:

• $12 million: NAB created in fees for PricewaterhouseCoopers in 2003 (Leon Gettler)
• $220 million: Revenue generated by PricewaterhouseCoopers from the financial services sector in 2003, accounting for almost 27% of its revenue (Source: Leon Gettler)
• 400 people: Number of employees in Ernst & Young's financial services practice nationwide (Source: Leon Gettler)
• 100 people: Number of employees in Ernst & Young's Melbourne office (Source: Leon Gettler)
• 80 to 100 people: Number of employees nationwide, with more working overseas, that Ernst & Young would need to duplicate to tackle NAB's audit (Source: Leon Gettler)
• 27%: Percentage of PricewaterhouseCoopers revenue generated by the financial services sector in 2003 (Source: Leon Gettler)

Sources:

• Leon Gettler