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Flutter has backtracked on a plan to replace long-standing auditor KPMG with Deloitte after the gambling group’s decision to list its shares in New York freed it from independence rules that would have required it to rotate.
The decision to use the flexibility afforded by US rules to continue into a third decade of having its accounts checked by KPMG means Deloitte will miss out on a lucrative audit fee, which rose to $22mn last year.
Flutter, owner of bookmakers Paddy Power and Betfair, ran a competitive tender in 2022 to find a new auditor to take over from KPMG from 2024.
The company said at the time that there were “no compelling reasons” to change but that EU rotation rules required it to switch after the completion of its 2023 accounts because KPMG had served since 2002. The rules are designed to keep auditors independent of their clients by forcing them to rotate at least once every 20 years.
Flutter announced last year that Deloitte’s Irish business had won the tender to replace KPMG Ireland, which has historically used other firms in its network in countries such as the US and UK for the majority of the work for the gambling group.
But Flutter, one of a series of companies seeking access to deeper pools of investor cash by exiting the UK’s FTSE 100 in favour of a primary listing in New York, has now capitalised on its move across the Atlantic to avoid an unwanted change.
The company cancelled its secondary listing on Euronext Dublin in January in favour of admitting its shares to trading in New York, freeing the company from EU rotation requirements, as such rules do not exist in the US.
Despite Flutter’s plan to retain a secondary listing in London, UK rotation requirements do not apply because the company is incorporated in Ireland.
In its annual report published in late March, Flutter said it had ditched the planned switch to Deloitte because of the “complexity” it faced in shifting to US accounting standards and related changes to its controls. It said its audit committee believed sticking with KPMG would “aid a smooth transition and ensure continued audit quality”.
It means Deloitte will miss out on significant fees. KPMG was paid $22mn last year, up from $8mn the previous year. The increase was due to the requirement for US-listed companies to pay auditors to check their internal controls under Sarbanes-Oxley rules and one-off costs associated with changing from international to US financial reporting, said a person familiar with the matter.
Flutter did not say whether Deloitte would be paid for work it had done in 2023 in preparation for taking over the audit. Incoming auditors are usually not paid for work shadowing their predecessor and familiarising themselves with the company before taking over.
However, Deloitte will be free to win advisory work from Flutter that it would have been barred from doing had it been appointed as auditor.
In its annual report, Flutter said its audit committee was “committed to maintaining best practice . . . including consideration of an audit tender at a future point in time”.
Deloitte and KPMG declined to comment.