AIB's decision to put its annual audit contract out to tender must be disappointing for the newly merged accountancy firm, PricewaterhouseCoopers. The firm - PwC comprises the operations of Price Waterhouse and Coopers and Lybrand which merged worldwide six months ago - audited the accounts of both AIB and Bank of Ireland. Coopers and Lybrand has been auditor to AIB for 32 years.

While AIB was at pains to point out this week that what was involved was a tender process and the PwC could be the eventual winner of the contract, there must be some concern at PwC that it may prove impossible to hold on to the business of all of the clients who are competitors.

This concern will be accentuated by the news that British bank, Abbey National, is replacing current auditors PwC with Deloitte and Touche. Abbey became the first of the big British financial companies to cause the huge accountancy firm to question the wisdom of the mega merger.

Concern that PwC is too dominant in the audit of banking and life assurance firms has resulted in Abbey putting its £4.3 million annual audit contract out to tender. Deloitte & Touche is to take over the job.

Abbey's concern over PwC's large slice of British banking and life assurance audit business is probably based on two main issues: it is not happy that its auditors would also audit the accounts and give financial advice to many of its competitors; and it is concerned that the best PwC team may not be put on the Abbey audit.

The worry for PwC must be that other clients could have similar feelings and that this could be the first of many defections of both financial and other big companies from the newly merged accountancy firm. At the time of the merger six months ago, the merged PwC audited 47 of the top 100 companies quoted on the London Stock Exchange and a further 93 of the next 250 firms and half the top 100 financial companies. Since then only Diageo of the top 100 companies has left PwC.

Defections on any scale would mean that the merged operation would not be able to get the benefits of economies of scale to the extent envisaged. PwC will be anxious to reassure existing clients that it has not become too big to ensure quality of service and that the Chinese walls within the firm are high enough to ensure that auditing or advising competitor companies does not result in information leaks.

Among the firms that could benefit are KPMG and Ernst and Young which called off their own planned merger apparently on the grounds that regulatory approval might not have been forthcoming.