Regulatory demands see AIM clients jump ship to Big Four

The diversity of auditors working for AIM companies has always seen London’s
junior exchange held up as the model example of how a competitive audit market
should function.

The latest auditor rankings for the third quarter of 2007, released by
Hemscott, however, seem to have disturbed the idealistic perception of AIM as a
broad church.

The market still has a mid-tier firm, Grant Thornton, as its market leader
and the giant global firms of Deloitte, PricewaterhouseCoopers and Ernst &
Young still trail
BDO Stoy Hayward in the client number stakes.

What has attracted attention, though, is the spotting of a trend by KPMG that
a number of its client wins on AIM over the third quarter were driven by demand
for IFRS expertise, as AIM companies have had to make the transition to the new

‘IFRS on AIM has been a main driver for us. There has been a big impetus for
IFRS expertise and we have benefited from having been through the process with
our FTSE clients,’ a KPMG spokesman says.

The trend saw KPMG win 18 new AIM clients. If Grant Thornton had not
completed its merger with Robson Rhodes it may have been bumped from the top of
the pile by KPMG.

Indeed, all the Big Four saw a significant number of client wins over the

Deloitte won 11 new clients, E&Y won 15 audits and PwC picked up eight
new clients.
In contrast BDO Stoy Hayward picked up only two more audits, as did PKF and
Smith & Williamson, while Baker Tilly lost nine clients.

So is it the case that AIM companies feel they have to go to the giant firms
for the IFRS expertise they need, or did the Big Four simply have a few good
months in the market?

David Herbinet, head of public interest markets at Mazars, who increased
their AIM client numbers 17 to 40, fears that institutional prejudice may be
creeping into the junior market.

‘This could be just another case of institutional prejudice permeating the
lower markets, where a company feels that it has to go to certain firms for
certain jobs. There is IFRS capability outside the Big Four but companies don’t
want to believe it,’ Herbinet says.

Steve Maslin, head of external professional affairs at Grant Thornton, is
less concerned about the suggested trends behind the numbers.

‘We are still winning clients organically and from our viewpoint the key
issues are our culture which is a good fit with AIM companies. We have also
increased our profile in key industry sectors such as media, technology and
resources. I can’t think of a single client that we have lost because of IFRS,’
he says.

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