The credit crunch has kicked the audit choice debate into touch, for now at least. But with the Financial Reporting Council’s recommendations for more competition and choice in the market due any time soon, there are signs that the market is beginning to shift.
The latest audit fees survey from our sister title Financial Director shows only a comparatively modest increase in FTSE 100 audit fees from an average of £3.7m to £4m. And it shows a market firmly stitched up by the Big Four.
Drop to the FTSE 250, though, and it’s a subtly different story. In that market, audit fees are dropping (15%) as are audit-related fees (taken together, the two are down 7% year or year). BDO Stoy Hayward’s Jeremy Newman has led the mid-tier campaign for competition and choice. And there’s evidence that his campaign is beginning to deliver.
Albeit from a low base, BDO has grown its audit fees by 21% and its combined audit and audit-related fees by 57%. That said it’s down by one client to five, but demanding higher fees from existing clients used to be the preserve of the bigger firms. Perhaps more significantly Grant Thornton, a much quieter protagonist in this debate, has gained its first two FTSE 250 clients, creating a six-firm market. Deloitte and KPMG both gained a client each, with E&Y and PwC in retreat.
It would be an exaggeration to suggest that these figures represent a revolution. But they do indicate a willingness on the part of some of the biggest (second-tier) companies in the UK to listen to the mid-tier case.
Next year’s results will be closely watched as will the FRC’s steps in the interim.
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