P&O Ferries hires tiny four-person accounting firm to replace KPMG
P&O Ferries has hired a tiny four-person auditing firm to replace the Big Four accountant that resigned from approving its annual accounts in March.
The move appears to raise further questions over the governance and financial health of the company, which has attracted a string of negative headlines after its controversial sacking of 786 mainly British ferry workers in 2022 – whom it then replaced with low-cost agency staff from countries including India, the Philippines and Malaysia.
The ferry operator's 2022 accounts were almost 11 months late when they were belatedly published in November of last year and showed that the company spent more than £47m on jettisoning its UK seafarers.
Its 2023 numbers are now eight months behind schedule and in March KPMG, the UK's fourth largest accounting firm, resigned as P&O Ferries' auditor. In its resignation letter, the accountants said: 'It has not been possible to complete an audit of the 2023 accounts to the required standard within management's desired timetable.'
Failure to file company accounts is a criminal offence – albeit one that is rarely punished with anything more than a fine from Companies House. However, critical comments by outgoing auditors are relatively unusual and when a company changes firms it would typically aim to hire a replacement of a similar size.
P&O Ferries' new auditor is a firm called Just Audit & Assurance (JAA), which is based in Witney in Oxfordshire and has four employees – while it says it can 'draw upon' 35 people to audit accounts. The fee for the P&O audit will be about £265,000 – the largest it currently charges and accounting for about 8% of revenues, the firm said. In the 2022 accounts, audit fees were shown to have totalled £1.3m.
Prem Sikka, a professor of accounting and a Labour peer, said: 'There are some serious questions about auditor independence. A small firm of four staff is auditing a giant conglomerate. The fees from this are likely to form a large part of the firm's income and the concern will be that the fear of losing a major client might influence the audit approach.
'P&O Ferries transports more than 4 million passengers a year and employs thousands of people. The public will want to be reassured that the company did not go opinion-shopping and that it is financially sound.'
Jonathan Russell, JAA's majority shareholder and one of the firm's two 'responsible individuals' who are authorised to sign off audit reports, told the Guardian and ITV News: 'You can't buy me because I'm not money oriented. So my opinion is going to be my opinion.'
'I understand the question [about JAA's size],' he added. 'I feel sometimes that the audit is not necessarily now being delivered how it should be … I used [failed construction group] Carillion as an example on a paper I was presenting … as a set of publicly published accounts that didn't make any sense to me.
'So you know, yes, you can have a big name; yes, you can have a small name. Does it mean that the audits are done any better or worse? I don't know. I can tell you now that the average experience in auditing of my staff is over 20 years.'
JAA claimed P&O had already informed KPMG that it was being replaced on the 2023 audit when the Big Four firm resigned. KPMG declined to comment.
P&O declined invitations by the Guardian and ITV News to comment. JAA added that P&O first approached the firm to audit its accounts last year and that it expects the 2023 accounts to be published by the end of this month.
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