In a move that has raised eyebrows across the financial and maritime industries, P&O Ferries, a major UK ferry operator, has appointed Just Audit & Assurance, a tiny firm with just four employees, to audit its accounts following the abrupt resignation of its long-standing auditor, KPMG, in March 2025. This decision comes amid ongoing controversies surrounding P&O’s financial reporting and governance, prompting questions about why a global auditing giant like KPMG walked away and whether a small firm can credibly oversee the accounts of a sprawling conglomerate. This article examines the reasons behind KPMG’s exit, the implications of hiring a micro-firm for such a complex audit, and the broader concerns about P&O’s financial transparency.
Why Did KPMG Quit?
KPMG had been P&O Ferries’ auditor since 2007, overseeing the company’s financial statements through years of operational challenges and public scrutiny. However, in early 2025, KPMG resigned, citing unresolved issues that prevented it from completing the audit of P&O’s 2023 accounts to the “required standard.” According to reports, the resignation stemmed from persistent delays in P&O’s financial filings, with the company failing to submit accounts on time for three consecutive years.
The root of these delays appears tied to deeper financial and operational complexities. P&O Ferries, owned by Dubai-based DP World, faced significant backlash in March 2022 when it illegally sacked 800 UK seafarers, replacing them with lower-paid agency workers. This scandal triggered regulatory investigations and damaged the company’s reputation, potentially complicating its financial reporting. KPMG noted that the factors causing delays in the 2022 accounts—likely related to accounting irregularities or incomplete records—remained unaddressed by 2025, making it impossible to sign off on the 2023 accounts with confidence.
KPMG’s departure also reflects growing pressure on Big Four firms (KPMG, PwC, Deloitte, and EY) to avoid reputational risks associated with high-profile clients mired in controversy. P&O’s history of late filings and public scandals may have pushed KPMG to reassess its involvement, especially as auditors face stricter regulatory scrutiny in the UK following high-profile corporate failures like Carillion and Thomas Cook. By resigning, KPMG likely sought to protect its credibility, signalling that P&O’s financial governance was too problematic to endorse.
Just Audit & Assurance: Can a Four-Person Firm Handle P&O’s Audit?
P&O’s decision to replace KPMG with Just Audit & Assurance, a small firm based in Witney, Oxfordshire (though some reports mistakenly cite Hampshire), has sparked widespread scepticism. With only four staff members, Just Audit & Assurance is a stark contrast to KPMG’s global network of thousands of professionals. The appointment raises critical questions about the firm’s capacity to audit a company of P&O’s scale, which operates a fleet of ferries across multiple routes, employs thousands, and generates significant revenue under the umbrella of DP World, a multinational conglomerate.
1. Resource Constraints
Auditing a company like P&O requires extensive resources, including expertise in international accounting standards, maritime industry regulations, and complex corporate structures. A four-person firm, even if highly skilled, may struggle to conduct the necessary fieldwork, review vast datasets, and verify transactions across P&O’s operations. As Prem Sikka, a prominent accounting academic, noted, “There are some serious questions about auditor independence. A small firm of four staff is auditing a giant conglomerate.” The risk is that Just Audit & Assurance may lack the manpower to thoroughly scrutinise P&O’s accounts, potentially leading to oversights or reliance on management-provided data without sufficient challenge.
2. Independence Concerns
Auditor independence is a cornerstone of credible financial reporting. A small firm like Just Audit & Assurance may face pressure to maintain its relationship with a high-profile client like P&O, especially if the contract represents a significant portion of its revenue. Larger firms like KPMG have the financial cushion to push back against management pressures, but a micro-firm may be more vulnerable to influence, raising doubts about its ability to deliver an impartial audit.
3. Cost-Cutting Motives
P&O’s choice of Just Audit & Assurance appears driven by cost. Reports indicate the firm’s audit fee is significantly lower than KPMG’s, with P&O slashing its audit costs by £1.3 million. While cost efficiency is a legitimate goal, prioritising price over quality in auditing can undermine stakeholder confidence. Investors, regulators, and the public rely on audits to ensure financial transparency, and a bargain-basement approach risks eroding trust, especially for a company already under scrutiny for governance lapses.
4. Regulatory Implications
The UK’s Financial Reporting Council (FRC) oversees audit quality, and P&O’s appointment of such a small firm may attract regulatory attention. If Just Audit & Assurance fails to meet auditing standards, it could face sanctions, and P&O’s accounts may be deemed unreliable, further damaging the company’s reputation. Additionally, the FRC has been pushing for reforms to improve audit quality, and P&O’s move could be seen as a step backward, potentially inviting closer scrutiny of both the company and its new auditor.
Broader Implications for P&O’s Governance
P&O Ferries’ auditor switch underscores deeper governance challenges. The company’s failure to file accounts on time for three years suggests systemic issues in its financial controls, possibly exacerbated by its controversial cost-cutting measures and complex ownership structure under DP World. Hiring a tiny audit firm may be a short-term fix to meet statutory requirements, but it does little to address these underlying problems or restore public trust.
The move also highlights the risks of relying on small audit firms for large corporations. While smaller firms can provide personalised service and competitive pricing, they often lack the expertise and resources to handle complex audits. This case may fuel calls for stricter regulations on auditor appointments, particularly for companies in critical industries like transportation, where financial stability impacts jobs and public services.
Conclusion
KPMG’s resignation from P&O Ferries was a red flag, signalling unresolved financial and governance issues that made a credible audit unattainable. By appointing Just Audit & Assurance, a firm with only four staff members, P&O appears to prioritise cost over quality, raising serious doubts about the integrity of its future financial statements. While Just Audit & Assurance may be competent within its niche, its capacity to independently audit a conglomerate like P&O is questionable, given the company’s scale and complexity.
For P&O, the auditor switch is the latest in a saga of controversies that continue to erode trust. To rebuild confidence, the company must address its financial delays, strengthen internal controls, and ensure its new auditor can withstand scrutiny. Meanwhile, regulators and stakeholders should closely monitor this unusual arrangement to protect the public interest. As the maritime giant sails into uncharted financial waters, the choice of a tiny audit firm may prove a risky voyage indeed.