The Top 50 - Audit’s slow progress
Without extensive IFRS or Sarbanes-Oxley work, audit growth has been subdued
Perhaps the most striking feature of the service lines in this year’s Top 50
is the subdued growth in audit. Audit has grown by only 4.8% according to this
year’s survey, compared with double-digit growth for other lines of work.
Excluding Deloitte (which submitted the same figures for this year as it did
for last year), overall the firms made £2.83bn this year, compared with £2.7bn
last year.
For comparison purposes only, firms in the Top 50 in 2007 and 2008 were
measured. The total audit fee income this year is £3.42bn across the whole of
the Top 50.
Tax revenues were up by 12%, again excluding Deloitte, from £1.75bn to
£1.95bn. Total tax revenues for the Top 50 is £2.46bn.
Grant Thornton’s external head of professional affairs Steve Maslin says he
is not surprised at the growth in other sectors because of significant expansion
in the economy. ‘There has been a large degree of corporate finance activity
and, to some extent, consulting and tax work on the back of that activity,’ he
says. ‘As we come into the current year, I would suspect that an awful lot of
those other service line growths are likely to slow as there has been a downturn
in discretionary spending consulting and there is likely to be a fall in a
number of substantial new flotations.’
Maslin says that when looking at the audit numbers bear in mind that
different firms include different items in what they report on in different
service lines. ‘Some of what is disclosed might also be included in transaction
support work, and some of those classifications might move from one year to
another, and these would impact on growth across service lines.’
Deloitte’s head of assurance, Martyn Jones, says the audit figures also
reflect the tail-end of the impact of the change to guidance relating to
Sarbanes-Oxley. ‘The audit market revenues reflect a number of regulatory
developments, along with upcoming accounting developments, all of which will
impact audit costs.
Clearly, through the credit crunch there is a great need in many cases for
more work arising from additional efforts in valuation and going through certain
issues.’
He adds: ‘Increasingly, when you stand back and look at the revenue audits of
large companies, you find they are driven by regulatory change, and every time
new standards or others are issued, it has an impact on the cost of audit.’