‘Institutional prejudice’ extends to largest AIM audits

'Institutional prejudice' extends to largest AIM audits

Big Four prejudice could be creeping into the junior market

The competition for the audits of companies listed on the Alternative
Investment Market has always been thought to be more diverse than those on the
main list, but research suggests that Big Four prejudice could be creeping into
the junior market.

Jeremy Newman, managing partner of BDO Stoy Hayward, and Grant Thornton chief
executive Michael Cleary have pointed to the competitiveness of the AIM market
as evidence that the Big Four are unfairly favoured on the main list.

But the latest corporate adviser rankings by Hemscott suggest that the so
called ‘institutional prejudice’ towards the Big Four on the main market may
have begun to filter down to AIM.

Hemscott’s figures for AIM auditors over the last quarter indicate that the
biggest companies on AIM all favour a Big Four firm.

The data provider analysed the combined market caps of the clients of the 20
leading AIM auditors and found that the clients of the Big Four were far larger
than their mid-tier counterparts.

KPMG topped the list with a client market cap of £10.18bn, Deloitte was
second with a client market cap of £9.7bn, followed by PwC with £9.4bn and Ernst
& Young with £8.4bn.

The closest mid-tier auditor was BDO Stoy Hayward, whose AIM clients had a
combined market cap of £5.9bn, almost £2.5bn shy of the E&Y levels. Grant
Thornton’s clients were valued at £4.8bn.

When it comes to just the number of clients the picture is more mixed. Grant
Thornton leads the way with 154 clients, followed by KPMG with 141 clients and
BDO Stoy Hayward with 132 clients.

However, the fact that the biggest companies on AIM still seem to prefer a
Big Four auditor suggests that ‘institutional prejudice’ could be creeping into
the junior market.

Steve Maslin, audit partner at Grant Thornton, however, dismisses this
suggestion and argues that the market cap figures are distorted by the influence
of a few very large companies listed on AIM.

‘If you look at AIM there are a small number of companies with market
capitalisations of between £1bn and £1.5bn, when the average market
capitalisation of an AIM company is £100m,’ Maslin says.

He adds: ‘There is definitely a skewing there and that has to be put in
perspective. We are focused on servicing a significant number of companies
across a range of sectors, rather than eyeing one or two very big companies.’

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