Mortgage lender Countrywide Financial Corp. on Tuesday fired Grant Thornton as its independent auditor after 30 years and chose KPMG, one of the top four global accounting firms.
The decision by Countrywide, one of Grant's biggest audit clients, came after a nine-month review process and was based on the company's need for a larger auditing firm, said Michael Dougherty, chairman of Countrywide's Audit and Ethics Committee.
The loss of a major U.S. client comes as Grant's global network is struggling with the fallout from the collapse of Italian food company Parmalat. Grant's Italian partnership audited Bonlat Financing Corp., a Parmalat unit based in the Cayman Islands. Parmalat collapsed after a Bonlat account that supposedly contained almost $5 billion turned out to be a fake.
"This decision had nothing to do with Parmalat," Dougherty said in an interview. "We spent several hundred hours interviewing four firms over a nine-month period and we chose KPMG because they best fit our requirements," he said.
Ed Nussbaum, managing partner at Grant Thornton, said Parmalat had not become a major issue for U.S. clients.
"We have not had any indications of any clients wanting to switch auditors because of this," he said. "We've gotten calls from some clients and we encouraged our U.S. partners to reach out to reassure people," Nussbaum said.
Grant Thornton is structured as a confederation of independent national partnerships with no legal liability to each other. The umbrella organization provides some marketing and other services on a global basis, but there is no global sharing of revenue.
Grant Thornton said in a Jan. 2 statement that the U.S. partnership had no financial, legal or regulatory liability to Parmalat.
David McDonnell, chief executive of London-based Grant Thornton, told the Financial Times on Tuesday that the firm's reputation had been damaged by the scandal.
Calabasas-based Countrywide is one of two Grant Thornton clients in the Standard & Poor's 500 index, according to Bloomberg data. Grant Thornton has 424 audit clients that are registered with the Securities and Exchange Commission, according to the Public Accounting Report, an industry publication. That contrasts with 2,441 for PricewaterhouseCoopers, the world's largest accounting firm.
"It's not good news for Grant," said Jonathan Hamilton, editor of the Public Accounting Report. "Countrywide was one of their biggest publicly traded clients. It looks bad, and as we know with auditors, perception is everything."