Big 4 Auditors' Business Models Thrown Into Uncertainty by UK Competition Probe

Oct. 23, 2012 - PRLog -- Against the backdrop of the UK Competition Commission's probe into the larger listed company audit market, Accountancy magazine's annual FTSE 100 auditor survey shows a new level of uncertainty among the Big 4 accountancy firms.

Accountancy (http://www.accountancylive.com) is published by CCH, the world's largest provider of tax, accounting and audit information, software and services, part of global information services group, Wolters Kluwer.

While the almost total domination of the FTSE 100 audit sector by the Big 4 firms seems unshakeable at present, a growing volatility in the market is creating a situation that could prove disruptive to the Big 4's business models.

Audit is a huge earner for the Big 4 accountancy firms, with the FTSE 100 sector 99% dominated by Deloitte, Ernst & Young, KPMG and PwC. In the 2011-12 year, total audit and related fees paid to these accountancy firms, plus BDO, by the UK's largest companies added up to £843.3M (US$1.35 billion).

Yet Investment bank Schroders and media group ITV, together with utilities giant BG Group among several others, have recently put their audits out to tender. Auditor switches have been made by insurer Aviva, copper producer Kazakhmys and United Utilities.

"Our survey indicates there are several schools of thought about why there has been a sudden flurry of activity in the audit market of the UK's largest listed companies," says Accountancy editor, Sara White. "Coincidence is not among them.

"It could be a desire to beat the threat of forced auditor rotation and mandatory tendering ahead of any concrete moves from UK competition authorities and European regulators."

Nearly static audit fee income
In spite of this uncertainly and the state of the UK economy exerting downward pressure on fees, FTSE 100 company auditor firms managed to increase their total audit fees by just £15.5M in the latest Accountancy survey, compared with its analysis published in 2011. PwC was top of the tree with annual audit fee income of £241M in 2012, although this was down from a peak of £250M in 2010.

Ten reasons why clients ditch auditors
The Competition Commission has revealed a number of reasons why a large listed company would dump its incumbent auditor, the Accountancy survey reports:

● Insufficient responsiveness to their clients' concerns

● Concerns about the audit partner

● Lack of timely resolution of technical issues

● Weak controls in the firm's international network

● A new CEO and/or audit committee chair

● A competitor has better expertise

● Proposed fees were too high

● Poor communications

● Significant surprises

● Lack of insight and business understanding

'Swap Shop: FTSE 100 Auditors Survey' by Philip Smith Is published by Accountancy magazine, November 2012.

- Ends-

Notes to Editors

A copy of the full article, which includes the full survey analysis, can be provided to journalists on request for review by contacting David Wells, Head of Communications at Wolters Kluwer UK: david.wells@wolterskluwer.co.uk.

About CCH and Wolters Kluwer

CCH, a Wolters Kluwer business (http://www.cch.co.uk), is the leading global provider of tax, accountancy and audit information, software and services. It has served tax, accountancy and business professionals since 1913. In the UK CCH provides online information, books, software, magazines, professional development, fee protection and consultancy.

Wolters Kluwer (http://www.wolterskluwer.com) is a market-leading global information services company with annual revenues (2011) of €3.4 billion and maintains operations in over 40 countries across Europe, North America, Asia Pacific and Latin America. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

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