Top 30 Accounting Networks and Associations 2008

All eyes in the accountancy world have been on how the Big Four are surviving the current economic downturn. Corporate finance work in particular has been expected to fall off a cliff, and with the best will in the world, this missing fee income will not be replaced completely by corporate recovery work.

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But so far, income is holding up among the four largest accountancy networks.

PricewaterhouseCoopers, the world’s largest accountancy group, reported a 14% increase in worldwide fee income for the year to 30 June 2008. This growth has secured its position at the top of Accountancy Age’s international accountancy survey with $28.2bn (£16.4bn) in global income. Half of that income came from Europe, the Middle East and Africa, while just over one-third (36%) was earned in the Americas. The remaining 14% came from its firms based in Asia and the Pacific rim.

Sam DiPiazza, PwC International’s chief executive, says: ‘Despite the challenges posed by the continuing credit crunch, particularly in developed markets, PwC’s results held up well and all of our lines of business and firms continue to grow.’

But its percentages are changing ­ audit and assurance for the first time accounted for less than one-half (49%) of the total, showing the gradual creep away from the bedrock of the accountancy profession’s work.

PwC explains this by saying that the 3% growth in its assurance business reflected the ‘difficult market conditions, a slowdown from the extremely high growth in this area in previous years, changing regulatory requirements and the very competitive nature of the assurance market’.

Ah yes, the competition. Although PwC would deny this, it must be looking over its shoulder at Deloitte Touche Tohmatsu. With a growth rate of nearly 19% this year, Deloitte is snapping at PwC’s heels, revelling in a global fee income of around $27.4bn.

When announcing the results, Deloitte global chief Jim Quigley said: ‘Our people’s continued focus on excellence and their demonstrated ability to work together across geographies to meet our clients’ needs are fundamental to our success. Our results show that our client-centric business model built upon a global culture of consultation and collaboration, and delivery through strong member firms with global connections, is a winning strategy.’

This may sound like a statement of the obvious, but it is a strategy that is paying off. While others might be focused internally on how they organise themselves, Deloitte is just getting on with it.

PwC recently announced how it would be creating three regional ‘clusters’ and Ernst & Young ­ third in the survey ­ has made much of its decision to bring its firms in Europe, Africa, the Middle East and India much closer together. Although there will be no profit sharing per se, the firm will seek to spread costs and ensure common processes and quality throughout its individual firms. Such thinking helped the global organisation produce a 16% increase in fees up to 30 June 2008.

Jim Turley, the firm’s larger-than-life chief executive, makes much of the firm’s decision to more fully integrate its regional groups. ‘Today’s borderless business environment demands a truly global approach from our organisation and this is made even more important given the unprecedented turmoil we are seeing in financial markets around the world,’ Turley says.

Then there is KPMG, which has yet to produce its results for this year ­ due some time in either December or January. Last year it reported a 17% increase, bringing its largely pre-credit crunch income to $19.8bn.

Observers will be watching keenly, as its results will provide a clearer snapshot of how the UK’s largest firms are coping with the financial turmoil. In particular, it will be interesting to see how its new European partnership, which has so far brought the UK, German, Swiss and Spanish practices into a single firm, is faring.

To a degree, all the firms believe they have insulated their global businesses by tapping into the growth of the emerging markets. But as the Asian region makes up, on average, only 13% of their total income and, as the region itself begins to slow, the next year could prove very interesting for the four giants.

The next rung

It has also been an interesting year for BDO International, and new chairman Jeremy Newman, will have some pressing issues in his in-tray. The global organisation declared $4.7bn in worldwide income this year, placing it fifth in the survey.

Newman has long been a vociferous voice for opening up the profession to greater competition, but inheriting a group that is less than one-quarter of the size of the big boys shows he has some way to go.

But perhaps more pressing in the immediate future will be the ongoing legal row in the US over BDO Seidman. The US firm has been fighting a long running battle in the courts over its audit of Banco Espirito Santo and the international organisation is now doing its level best not to be dragged into the argument, and consequent liability (see page 18).

Grant Thornton International could usually expect to be placed next in the survey, but it has yet to declare its 2008 income.

This explains the appearance of RSM International at number six in the rankings. Earning $3.6bn as of 31 August 2008, it saw an 18% increase in fees this year. But it has been a tricky time for the organisation, which saw the loss of one of its key firms, Robson Rhodes, in the UK last year. The firm’s place at the table was snapped up by Bentley Jennison, the ambitious Midlands-based firm.

Finally, mention should be made of a new name in the top ten. Praxity, the new alliance formed by Moores Rowland International and Mazars, pulled in $2.8bn this year. Other organisations will undoubtedly be looking at this move as a way forwarded, so there is a good chance we will see more groups coming together in the coming months.