The data revealed that in 2016/17 audit fees for EY, Deloitte, KPMG, and PwC rose by 5.7% on the previous twelve months.
This is compared with only a 2.7 percent rise in audit fees in 2015/16.
While audit fees for firms outside of the Big Four are also high, they are steadier. Their audit income increased to 5.4 percent in 2016/17 from 4.3 percent in the previous year, a hike of 1.1 percent.
Amid scandals surrounding the Big Four this year, including the collapse of Carillion and KPMG South Africa, some believe there needs to be a major review of the accounting industry.
David Grunberg, senior partner at north London accountancy firm Grunberg & Co, said: “If one looks at the Top 100 firms nearly all of them have increased their turnover in the last year, but when we look at the value of the work handled, the Big Four continue to dominate the higher end of the market.
“For those firms outside of the Big Four, it is nigh on impossible to break into the magic circle of auditing the FTSE 100, and not much is different for the FTSE 350.
“It would be interesting to see if there is any correlation between the level of increase in audit fees and the number of claims made against Big Four
Grunberg believes overall that these top four firms will continue to celebrate success and growth in years to come. Demand for statutory audit work will likely increase.
Grunberg added: “The Big Four used to use the audit as a loss leader – in that other fees charged could be quite significant. Not so any more as the latest data shows.
“In addition, with the enhanced need for independence and the greater risk of serious fines for poor audit work, audit fees will have to increase to cover these higher costs.”
Outside specific audit work, non-audit work to audit clients’ fee income dropped by 8.9 percent for the Big Four according to the FRC. Non-Big Four firms also experienced a fall in fee income, but of 8.7 percent.
Grunberg said: “Changes to the audit rules and stricter requirements on auditors have seen the number of firms registered to carry out statutory audit work in the UK and Ireland fall by around 5.8 per cent during the last 12 months, while new applications to statutory audit organisations have fallen by a fifth.”
This suggests some major changes are needed to create a more competitive market for the UK accountancy industry.
He believes that based upon these findings something drastic is required to create a more competitive market for audit and accountancy work in the UK.
Many solutions to this have been suggested in the past, including smaller firms breaking away from the ICAEW and ACCA to form their own association to independently lobby government for a fairer chance.
Similarly banks and corporates could receive more education around the fact that there are so many firms out there that could do just as good a job as Deloitte, EY, KPMG, or PwC.
Grunberg commented: “Personally, I could also see the creation of a new audit company from a consortium of mid-sized firms to create a fifth player capable of auditing these entities and competing alongside the Big Four as a suitable alternative.
“As a profession, we should be doing our utmost to improve choice for businesses, but the current position means that many firms at the top feel they only have a choice of four practices to choose from – this is something that fundamentally needs to be reviewed.”