One in 20 audit firms quit as market evolves

One in 20 audit firms quit as market evolves

Audit red tape is impacting both ends of the market, according to the latest watchdog stats

THE number of practices providing audit services has continued to fall at a rapid pace, as the market comes to terms with regulatory and legislative edicts at both the top and lower ends of the spectrum.

The latest Key Facts and Trends report, issued by watchdog Financial Reporting Council, shows a profession with much change occurring in the field of audit. Some 304 practices have ditched their audit licence since December 2014, according to the report into the UK’s accounting profession, a 4.6% fall to 6,331. In 2004 there were nearly 10,000 (9,950).

Smaller audit firms have faced dealing with regulation that has pushed more and more clients out of a statutory audit. In January,, the government announced that the audit exemption threshold would be aligned with the revised ‘small company’ thresholds, which exempts companies that meet two of the three following criteria:

  • Turnover of less than or equal to £10.2m;
  • A balance sheet total of less than or equal to £5.1m; or
  • Employee numbers fewer than or equal to 50

The Key Facts document also highlighted important direction of travel for the large end of the audit market. For auditors of public interest entities, the Big Four firms have seen growth in all categories of audit/non-audit fee income, in contrast to non-Big Four.

The collective fee income for the Big Four across all PIE clients increased by 6.7% compared to an aggregate of 4.7% for PIE auditors outside the Big Four. More listed firms outside the FTSE 350 were being audited by the Big Four in 2015 compared to the previous year.

The latest figures at the top end clash with the direction of travel outlined by UK and European regulators, who have placed mechanisms in place intended to increase competition and quality for listed business audits. Mandatory audit tendering has now been enacted within the EU’s Audit Directive.

View the full report here, and follow Accountancy Age for more analysis. Find our views on 2014’s report here.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource