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.