Top 50: having a ball

It looks like a boom time in audit. There’s no contradicting the figures. The
Top 50 firms combined, reported a huge 21% increase in audit fees, making this
perhaps one of the most successful years ever for what was once considered the
Cinderella service line for accountancy firms.

The figures speak for themselves. Last year the Top 50 firms revealed
audit/accountancy revenues of £2.42bn, this year that sum has risen by £500m to

And as a share of the Top 50 total revenues, audit has improved by two
percentage points to 38%.

The rise broadly mirrors the findings of the annual audit fee survey
undertaken by our sister publication Financial Director which found that the
average statutory audit in the FTSE 100 had risen by an underlying 15%.

This year all the Big Four firms have seen their audit businesses play a
significant part in driving their growth. PricewaterhouseCoopers remains the
biggest auditor with total audit fees of £861m, but the firm did not see the
biggest rises. Among the Big Four Ernst & Young took that accolade with
growth of 27%, followed by PwC on 18%, Deloitte on 16.7% and KPMG on 16%.

But three of the biggest firms were outstripped by audit fee growth at BDO
Stoy Hayward which reported an impressive 25% improvement.

BDO’s head of London operations, Tony Perkins said the firm’s growth had come
through focusing on large corporate clients, investing in recruitment and
training, and having a strong sector focus.

He said that audit, as a career option, had increased its ‘attractiveness’ as
a result of the greater challenges that have resulted from the raft of
regulation that has affected the sector.

Some of the smaller firms saw even bigger spikes with Hacker Young declaring
revenues up by 32% and CLB Littlejohn Frazer up by 71%. But overall the year has
marked the return of audit, and its associated services, as a business driver
for accountancy firms.

Feeding into the figures has been advisory work on IFRS and Sarbanes Oxley,
plus the explosion in the AIM listings which require significant preparatory
audit work.

Steve Maslin, head of assurance services at Grant Thornton, said that many
factors had contributed to the increase in audit fees, including the
introduction of international audit standards. ‘For many firms audit is now a
significant growth area, where as for a 20-year period audit became the unsexy
part of what we are doing,’ he says.

The Big Four alone has generated more than £350m extra in audit fees over the
last year, a testament to the extra advisory work now being generated – as a
direct result of the continuing impact of regulation on the audit market. The
figures will no doubt fuel the argument on auditor liability in which investors
have complained that auditors do not require the new protection being offered in
the company law reform bill.

Debate continues to rage on what protection auditors should receive in the
bill with investors recently revealing that they feel their concerns have not
been heard. That however is unlikely to halt the resurrection of audit as a
major line of business for accountants.

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