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March 12, 2020 04:55 PM

Auditor Rotation on the FTSE MIB

Posted by jmckeon

This analysis was originally posted by Audit Analytics.

The FTSE MIB is the benchmark stock index consisting of the 40 most traded companies on the Borsa Italiana. In this post, we’ll examine the auditor tenure and rotation for these companies. 

Though Italy formally adopted the EU Audit Reform Directive 2014 policy in 2016, it was nothing new to Italy, which first introduced mandatory auditor rotation in 1975. Since 1975, Italian law has required that public companies rotate audit firms after nine years and individual statutory auditors after seven years, making the rotation date relatively predictable. 

According to current regulations, terms of rotation begin with the year of the IPO (initial public offering); therefore, if a company had engaged an auditor prior to its IPO, it is likely that an audit firm has audited a company for longer than nine years. The chart below shows the auditor tenure for companies listed on the FTSE MIB without taking the IPO date or start of the mandatory rotation into consideration.


With the exception of one company, Banca Generali, every company on the FTSE MIB is currently audited by one of the Big Four firms. EY audits 14 of these companies – the most within this index – accounting for 35% of the FTSE MIB.


In 2019, five companies underwent an auditor change; all of which had engaged their previous auditor in 2010 and appropriately followed regulations by rotating auditors nine years later. Of these changes, PwC lost three clients and gained one, netting two; EY lost two clients but gained two, netting 0; KPMG gained two clients, and Deloitte remained unaffected.


Following regulations, we can expect the following companies to undergo an auditor change in 2020.


Of these, only Salvatore Ferragamo has retained an auditor prior to 2011; the Company first engaged EY in 2002 but did not IPO until 2011.

We’ll be keeping an eye out for these auditor changes.


The analysis in this post was powered by the Audit Analytics Europe Auditor Changes database.
For more information on any of these European databases, or to request a demo, please contact us.

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Senior Research Analyst - Audit Analytics

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