BDO's audit win pushes fee growth past Big Four rivals

BDO Stoy Hayward shows the largest growth in audit/non-audit fee income, while Big Four firms take a knock

Written by Penny Sukhraj

Accountancy Age, 04 Oct 2007

The smallest of the Big Six firms, BDO Stoy Hayward, has shown the largest growth of a firm in audit/non-audit fee income for the last year with a 57% increase in the FTSE 250 index.

But while BDO showed a surge, other large firms took a knock, with PricewaterhouseCoopers down 9%, KPMG down 7% and Ernst & Young down 23% in the FTSE 250, according to figures from Accountancy Age’s sister magazine Financial Director. Only Deloitte showed a positive 3% growth.

BDO’s work on the merger of Derwent London significantly boosted its figures, as it made £100,000 in audit fees and an additional £600,000 in non-audit work relating to the company’s merger.

BDO’s managing partner, Jeremy Newman, said that the base numbers were so modest that the increase in one client made a huge difference to the firm’s total fees.

‘The single biggest change was that of Derwent London. We were the auditors of Derwent Valley previously and now we’re the auditors on the enlarged business. And we did the work on the merger,’ he said.

Newman said that the firm faced ‘serious competition’ from the Big Four. ‘What Derwent London shows is that we have a significant ability to act on very sizeable transactions involving larger companies.

Hopefully it will stop some of the prejudices in the capital market about our capability.’

In a less surprising result, PwC managed to stay ahead of the rest of the profession with £326m in audit and non-audit fee income for the FTSE 100, which was boosted
by the arrival of Standard Life, as well as bigger fees from Barclays, Lloyds TSB, Unilever and Royal Dutch Shell.

PwC’s audit fees for the FTSE 250 also topped the firms’ league table with £84m in combined audit and non-audit fees.

The firm’s head of assurance, Richard Sexton, maintained that it was ‘impossible to generalise about the different circumstances which may result in an increase in clients’ audit fees year on year.

‘For the year in question these circumstances will certainly have included the additional cost of the first year of Sarbanes-Oxley compliance for those companies that are SEC registrants.

‘PwC has a strong market share amongst the UK’s largest companies and audits roughly half of the SEC registrants in the FTSE 100,’ said Sexton.