United Spirits’ proposal to appoint PwC as auditors questioned by corporate governance body

An independent corporate governance advisory firm has questioned the proposal of United Spirits to appoint Price Waterhouse & Co as auditors of the liquor giant.

The Stakeholders’ Empowerment Services in its latest report said that PwC cannot be termed as independent as they had been hired to conduct an inquiry into the financials of United Spirits on behalf of the parent, Diageo plc, the London-based liquor company.

The inquiry report was not made public, and therefore, this indicates that they worked as private investigators for promoters and have created privileged relationship between PWC and Diageo,” the report said.

Hence, it has asked the shareholders to vote against the resolution when it comes up for voting during the annual general meeting scheduled for July 14. The report said such a move raises governance issues as change of auditors mid-way in its five year term is not normally carried out unless there is a major issue with them.

The current auditors, BSR & Co were appointed by the members to hold office from the conclusion of the 14{+t}{+h} AGM till the 19{+t}{+h} AGM.

However, on June 8, the auditors informed the company that they do not wish to continue as auditors from the end of the AGM being held on July 14.

On June 8, the board recommended that PwC should be appointed as its auditors. PwC were auditors of the firm between 2002 and 2011.

After their tenure ended, Walker Chandiok & Co were appointed auditors for 2012 and 2013.

Once Diageo took over United Spirits, B S R & Co were appointed as auditors in 2013 for a year and in AGM held in 2014 for five years.

SES said United Spirits should disclose to the shareholders the reason for B S R & Co. LLP not to continue as the auditors as a good governance practice.

PwC cannot be termed neutral independent auditor and their “behaviour in examining the accounts will be guided by their own findings, which are not in public domain and Diageo’s opinion”.

It pointed out that the settlement with Vijay Mallya, the former chairman of USL has been on the basis of the PwC report.

“There is information asymmetry between Diageo as a shareholder and other shareholders. And PwC and Diageo have same information which unfortunately is not available to other shareholders.”

The corporate governance body also questioned the reason for Diageo to sign an agreement with Mallya when he had been asked to resign following a probe report.

It felt that a public limited company should not have signed a private truce agreement with Mallya.

The shareholders have also been advised to analyse the accounts in detail including auditors’ qualifications and management’s response in view of the massive write off and issues relating to doubtful debts and transaction between other UB group companies.

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