The growth in audit has been subdued, according to the 2008 Top 50 survey. With a growth rate of only 4.8%, the total combined audit fee income this year is £3.42bn.
But this doesn’t necessarily mean this service line will stagnate in the next financial period.

Moves abroad on standard changes could mean an upward swing as the US authorities quicken their pace on the adoption of IFRS for Wall Street listed companies.

The US is expected to announce a framework this year which will detail objectives that must be achieved if US companies are to adopt international standards.

The completion of compliance work related to Sarbanes-Oxley rules may have been blamed for the slowdown in audit income for the profession, but US adoption of IFRS could offset this.

KPMG’s head of assurance, Richard Bennison, said this could be a key opportunity for the UK firms.

‘The move by the US to adopt IFRS, as well as one or two other countries, could trigger businesses to embark on a conversion project. This would be an opportunity for the UK firms to step in and help their colleagues on those conversions. This would be quite a big opportunity,’ said Bennison.

But, the valuation work that firms did with banks for the December year ends look set to taper off also.

‘We saw a bit of incremental work on financial institutions where we looked at their models and fair value. Frankly this didn’t increase audit revenue dramatically. And the banks will now use the same models as they did last year. There won’t be significant change year on year,’ said Bennison.

Deloitte’s head of assurance, Martyn Jones, confirmed that regulatory developments drive audit revenues, along with upcoming accounting developments.

‘Clearly, through the credit crunch there is a great need in many cases for more work arising from additional efforts in valuation and going through certain issues,’ explained Jones. ‘Increasingly, when you stand back and look at the revenue audits of large companies, you find they are driven by regulatory change, and every time new standards or others are issued, it has an impact on the cost of audit.’

Grant Thornton’s head of professional affairs, Steve Maslin, said that audit revenues were also different because of the different items firms chose to include in their services lines. ‘These classifications might move on from one year to another, and these would impact on growth,’ said Maslin.