American Express has announced it will end its 30-year relationship with its independent auditor Ernst & Young LLP next year, the Wall Street Journal reported.
American Express disclosed the planned change to PricewaterhouseCoopers LLP in a Securities and Exchange Commission filing last week.
According to the accounting research firm Audit Analytics, American Express paid Ernst $23 million in audit fees and $3.5 million in other fees in 2003, making American Express one of Ernst & Young's largest audit clients, the Journal reported.
Ernst & Young will finish the audit of the financial services giant's 2004 financial statements and PricewaterhouseCoopers LLP will take over, beginning with the 2005 statements.
An Ernst spokesman declined to comment on the reasons Ernst was dropped, but said the firm would work to ensure "a seamless transition." Ernst reported $5.3 billion in revenue for its 2003 fiscal year, the Journal reported.
The SEC's enforcement division has investigated whether Ernst violated federal auditor-independence rules by participating in a profit-sharing deal with American Express' travel-services unit in the 1990s, the Journal reported. The SEC referred to wide-scale compliance issues with auditor-independence rules as part of court filings last year in a proceeding looking into Ernst's relationship with PeopleSoft, another audit client.
The independence rules prohibit firms from entering into business relationships with audit clients and the SEC pointed to other internal Ernst documents showing the firm had "strategic partnering relationships" with American Express and other audit clients, the Journal reported.
The evidence presented in the proceeding led the administrative-law judge to bar Ernst in April from accepting new publicly traded audit clients for six months, the Journal reported.
An American Express spokeswoman, Judy Tenzer, on Wednesday said the travel-contract issue had "no bearing on our decision whatsoever." Asked by the Journal why the company's audit committee dropped Ernst in favor of PricewaterhouseCoopers, Tenzer cited PricewaterhouseCoopers's "industry experience in our areas of financial services and insurance." The company had disclosed in March that its audit committee would consider proposals from other audit firms.