Audit fee surge in FTSE100 goes straight into Big Four's pockets
Audit fees surged 15% last year as the Big Four firms cashed in on their
stranglehold on the FTSE100. The increase is seven times the average rate in
2004 of around 2% or less.
Accountancy Age’s sister publication Financial Director revealed in
its annual audit fee survey that, of the £636.5m paid by the UK’s top 100
companies to their auditors, £636.2m went to PricewaterhouseCoopers, KPMG, Ernst
& Young and Deloitte.
Extra income from work on international financial reporting standards and
Sarbanes-Oxley regulation has boosted the audit fees of the larger firms. PwC
received £259m in fee income from FTSE100 companies last year, followed by KPMG
with £163.3m, Ernst & Young with £109.3m and Deloitte with £104.6m.
The Financial Director survey revealed that the average audit fee for a
FTSE100 company had increased by 15% to £3.26m. The rise follows a 12% jump in
the previous year. In 1997, the average FTSE100 audit fee was £1.95m.
Audit income is now on par with non-audit fees, which just four years ago
were three times higher than audit.
The strength of the Big Four in the FTSE100 was replicated in the FTSE250.
Although mid-tier firms Baker Tilly, Mazars, Robson Rhodes and BDO took home
£7.9m from FTSE250 clients, the Big Four monopolised the rest of the £290m pot.
Commentators have suggested that the boom enjoyed by the accounting firms in
2005 signalled a peak in the audit market, but senior figures in the Big Four
were confident that audit revenues would not fall.
PwC chairman Kieran Poynter said the audit fee windfall of 2005 would become
a stable source of income over the coming years. ‘Sarbox is an annual cycle that
companies are going to have to go through and there will be recurring work from
IFRS implementation, and revised IFRS,’ he said.
John Connolly, chief executive of Deloitte, said his firm was aiming to grow
audit income by another 11% this year after a 15.7% rise in 2005.
For the full FTSE350 Audit Fees survey, click