Goldman Sachs has broken with tradition and appointed Mazars to audit its European arm, the first time the US bank has chosen an auditor outside the Big Four, in a major coup for the mid-tier firm
Mazars, ranked tenth in the Accountancy league table of firms, will be responsible for auditing Goldman Sachs International from 2021. This includes the bank’s London and Frankfurt businesses. The firm is expected to earn around $5m (£4m) in fees when it takes over from PwC.
PwC will remain as auditor of the Goldman Sachs Group, a position the firm has held since 1922. According to the bank’s 2018 annual report, PwC was paid $63.1m in accounting fees for the year plus $9.6m in audit-related fees and $2.7m in tax fees, giving a total of $75.4m.
Goldman Sach’s decision to look outside the Big Four for an auditor for its European arm arose from the introduction of the EU’s mandatory auditor rotation rules, which apply to US and other overseas companies that are considered public interest entities in Europe. Since the bank uses all of the Big Four in some way for consulting services and they all had pre-existing relationships with the bank, it looked to the mid-tier firms, with Grant Thornton and BDO also among the contenders.
In July 2018, as the bank was conducting its search, there was controversy when it emerged the Prudential Regulation Authority (PRA) had raised concerns with Goldman Sachs that Grant Thornton might not have the ‘required skill, resources and experience to perform its function under the regulatory system’.
Sarah Breeden, the PRA’s executive director for international banks supervision, told a Treasury committee evidence session that there was a dialogue ongoing with Grant Thornton where they were being asked to demonstrate that they possessed these qualities.
The chairs of the work and pensions, business, energy and industrial strategy, and the Treasury select committees subsequently wrote to the PRA challenging this view and pointing out that during the financial crisis ‘nearly all the banks that failed back then were being audited by members of the Big Four’.
The letter stated: ‘Given their failings then, and the subsequent failings we have seen in audit such as BHS and Carillion, we would question whether any of the Big Four have sufficiently demonstrated the “required skills, resources and experience” to undertake these audits.’
Neither Goldman Sachs nor Mazars has made a comment on the appointment.
Pat Sweet
