AIB has put its annual audit contract out to tender in a move which could see accountants Cooper & Lybrand, now part of PriceWaterhouse-Coopers, lose a contract it has held for more than 30 years.

AIB said yesterday that the decision was taken to put the audit contract out to tender in order to "ensure that we have an audit service which is the best fit for our business which has changed over the years". Coopers & Lybrand was paid £1.5 million last year (including VAT) for the AIB audit and earned an additional £0.6 million in advisory fees from the bank.

An AIB spokeswoman stressed that what was involved was a tender process and that it was possible that PwC could get the contract.

But for PwC there must be some concern that, following the merger of Price Waterhouse and Coopers & Lybrand six months ago, the new firm will not be able to hold on to the business of all its clients especially where these clients are competing with each other.

Coopers & Lybrand has audited the AIB accounts for 32 years while Price Waterhouse is auditor to Bank of Ireland.

The AIB move comes as British financial institution Abbey National announced that it plans to switch its audit contract from PwC to Deloitte & Touche because of its concern at the dominance of PwC in parts of the British audit market.

Abbey announced that it had put its £4.3 million sterling annual audit contract out to tender following the PwC merger because of concern over the "concentration of UK banking and life assurance audits".

When the accountancy firms merged worldwide six months ago, PwC audited some 47 of the top 100 quoted companies in Britain and more than half the top 100 companies in the financial sector. PwC audits Abbey competitors such as Royal Bank of Scotland, Lloyds TSB and Barclays. At the time of the merger industry sources suggested that the merged operation would lose clients, maintaining that some clients would feel that they would not get the attention or service they needed in such a large firm and that Chinese Walls could not be high enough to prevent leakage of information where the accounts of competing firms were being audited. PwC rejected these arguments and has so far managed to hold on to most of its major clients. Since the merger the only defection from the top 100 British companies has been Diageo. But market commentators said that the Abbey move could be followed by a number of others.

In the Irish market PwC employs 1,133 people and claims to be the "largest professional services firm" in the State. It is the top fee earner, generating £65 million of fee income last year, according to the annual survey carried out by Finance magazine. It was followed by KPMG which produced fee income of £52 million.

In the Irish market the Big 5 firms such as KPMG and Ernst & Young, who called off their own planned merger, will be hoping to capitalise on any defections from PwC.