BT drops PwC following Italian accounts scandal

BT has replaced its auditor for the first time in 33 years after an accounting scandal at its Italian business cost it £530m.

The former state-owned phone giant has dropped PwC and will replace them with rival accounting firm KPMG.

In January, BT admitted its Italian business had overstated profits, leading to a share price slump.

KPMG was called on at the time to investigate what it described as "inappropriate behaviour" by managers.

Now the firm will be able to get to grips with the accounts more fully once the 2017-18 results are audited by PwC for the final time.

BT said it wanted to "ensure a smooth and effective migration" and will want to put a line in the sand under a difficult year.

Shares hit

The scandal at BT Italia emerged after a whistleblower informed executives in 2016 of the problems.

An subsequent investigation by KPMG found "improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions", which meant profits in the Italian business had been overstated for a number of years.

Last month, BT revealed that, as a result of the scandal, chief executive Gavin Patterson's pay would be cut from £5.28m to £1.34m.

Around 4,000 staff were also axed, although some of these cuts were announced before the scale of the scandal was known.

Shares slumped, wiping £8bn off BT's value and remain at four-year lows.

New stock market rules have been introduced in an attempt to encourage companies to change their auditors more regularly.

Businesses in the FTSE 350 must now put their auditing contract out to tender every 10 years, although they only need to change them every 20 years.

PwC was criticised for missing an accounting scandal at Tesco in 2014 - where it had been auditor for more than 30 years. It was later replaced by Deloitte.