They’re the savviest buyers in the business. Or, alternatively, the most
political audit pitch there is. Who audits the audit firms themselves?
Finding out is the equivalent of asking the chef what he or she would eat
when you order your lunch. Surely the firms themselves know who best to choose?
Accountancy Age decided to find out how much auditors pay auditors,
how often they rotate and how often audits go out to tender. What issues are
there with their positions on the audit choice debate? And do they really know
better than the average corporate?
Of the top 20 firms that responded to our survey, only five either had no
auditors as they are partnerships or recent conversions to LLPs.
Top of the list, with an expertise in professional service firms, is Horwath
Clark Whitehill with three audits. Grant Thornton also has three (though you
would expect that), Kingston Smith and PwC have two audits and the rest have
The Big Four pay around £300,000 for their audits. Thereafter, the figures
drop away slightly, with BDO paying PwC £200,000, Grant Thornton paying PKF
£152,000, Smith & Williamson paying Deloitte just a shade over £300,000 and
Vantis paying £226,000 to auditors E&Y.
The rest of the top 20 pay less than £100,000.
And like the market for major companies, the fees seem to have soared in the
past year or two. Excluding Horwath Clark Whitehill, whose auditors carried out
minimal work for the previous year and therefore are not comparable, the
nation’s audit firms are paying 14% more for their audits than they were on the
previous year they reported.
Perhaps one of the more striking features of the table is the degree to which
the Big Four, like their clients, rarely change their auditor.
E&Y has not changed auditor for 20 years, something it must hope its
clients would want to do too, but the rotation issue raises questions for E
&Y auditor BDO Stoy Hayward. In the course of researching this piece, BDO
managing partner Jeremy Newman reiterated his view that best practice involves
reviewing auditors roughly every seven years.
PwC has stuck with Horwath Clark Whitehill for 11 years, and Deloitte with
Grant Thornton for four years.
KPMG has used Grant Thornton for 12 years, but could be ready for change soon
‘Now that we have entered into KPMG Europe there is likely to be a review of all
our suppliers, including our auditors,’ says a spokesman. Could GT’s time be up?
For other firms, the figures are interesting, but may not show a willingness
to spend longer periods with an auditor. Most of the firms below the top six
only became LLPs relatively recently, and are still on their first auditor since
Of course, for many firms, there are issues about their choice of auditor
relating to their views on the audit choice debate.
Why, for instance, doesn’t Mazars have a joint audit given its defence of the
concept of joint auditing?
David Herbinet, head of professional affairs at Mazars, says: ‘At group
level, Mazars has joint audit. The auditors divide various parts of the audit
between them. It is impractical to have two auditors for every division. This is
the process of joint audit.’
And why does Jeremy Newman of BDO have the biggest of the Big Four auditors,
when he rails against the ‘institutional prejudice’ in favour of the largest
Newman says: ‘If we were to make a call today we might make a different call
to one we took a few years ago. Our market position is different now. Four years
ago we took the view that we didn’t want to go to a direct competitor. Our
competition then was much more with the mid-tier.’
Partly he didn’t want to create a situation where a rival knew intimate
details of his firm from the audit. He thinks that is less likely in any case
with PwC given its size.
Mazars thought similarly, but took the view that a confidentiality agreement
with auditors Horwath Clark Whitehill was a better solution.
Grant Thornton did think that hiring a Big Four firm would be an issue. A
spokeswoman says in answering why the firm picked PKF that: ‘conflict issues
potentially ruled out the Big Four’.
So are auditors savvier buyers of an audit than anyone else? They know more
about how much things cost, after all.
‘I am not sure we are necessarily savvier buyers. We understand the issues
they have got to face,’ says Glyn Williams, finance partner at Mazars.
Most firms seem to get on quite well with their auditors, at least those that
tell us so. Perhaps that is a sign of that understanding.
Newman of BDO can’t resist turning the question back to the audit choice
debate itself. ‘One thing I have learned from it is that I know what it is like
to be audited by PwC. I know what the quality of their audit is like because I
undergo it. Our audits are as good as theirs.’
Reporting team: David Jetuah, Nicholas Neveling, Kevin Reed
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