Winners and losers 2014 World Survey reveals challenges and predictions
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January 2014 Issue 533 www.InternationalAccountingBulletin.com
Winners and losers
2014 World Survey reveals
challenges and predictions
●● KPMG UK Co-op Bank audits under FRC investigation
●● EU audit reform to affect UK CC remedies implementation
●● IAB audit fee pressure survey
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International Accounting Bulletin editor’s letter
CONTENTS
Race to the bottom
News 02-03
■■ EU audit reform to affect UK CC In the past nine years the Big Four have and with an impressive response rate we
remedies implementation
■■ Grant Thornton International
increased their average fee income by a stag- have seen fee pressure being a principal con-
turning the tables in Brazil gering $51.5bn. In comparison, the next six cern for firm leaders. As audit and account-
largest mid-tier networks including BDO, ing revenues are harder to come by, respond-
Features 04-24 RSM, Grant Thornton International etc. saw ents speak of increasingly competitive con-
an average $11.5bn increase in the same time ditions and severe price undercutting. Due
o4-24: World Survey 2014 period. For the Big Four the increase has to the increased advisory capabilities of the
The coming year promises to be fiercely mainly come from the growth and rebuilding Big Four they might be in a better position
competitive for the profession as net- of advisory capabilities, with advisory rev- to undercut prices. However the four giants
works and associations battle for sur-
vival and growth against a backdrop of enues increasing by an average of $29.3bn are far from the only ones to blame for the
mergers and acquisitions and pending across the four firms since 2004. so-called race to the bottom, according to
market reforms.
While the advisory revenue pie has been respondents of the IAB fee pressure survey.
steadily increasing for the Big Four over the It seems that when behind a wall of ano-
past decade, the trend for audit and account- nymity firm leaders are much more can-
ing services is somewhat different with the did about the realities of fee pressure, with
average revenues earned by the Big Four almost 36% admitting in the past 12 months
decreasing by $5bn in the past five year. In they have had to face ongoing challenges of
the same time period the mid-tier increased maintaining audit quality in the face of fee
revenues from audit and accounting by an pressure, and an additional 26% saying
Editorial Advisory Board
Kevin McGrath, Crowe Horwath
average $1.9bn. In this year’s IAB World there were concerns over audit quality due
International CEO Survey we report further advisory M&A to fee pressure at their firm in the past year.
Kevin Arnold, Nexia International CEO
Geoff Barnes, Baker Tilly International
deals by the Big Four, such as the well pub- With 2014 looking to be a year of con-
president and CEO licised tie-up between PwC and global con- tinued M&A activity, improved global eco-
Graeme Gordon, Praxity executive director
sultancy Booz & Company at the end of last nomic outlook and pending EU audit chang-
Stephen Jacobs, INPACT International president
Jon Lisby, Kreston International year. Such deals are dubbed key for growth es, the fight for audit clients is very much
executive director
as regulatory compliance demands and fee on and before it is (again) too late, openly
James Mendelssohn, MSI
Global Alliance, executive chairman pressure are leading to a standstill of audit speaking of decreasing fees and the role the
Christian Mouillon, Ernst & Young global vice- profession in maintaining audit quality is of
chair, assurance revenues globally.
Ed Nusbaum, Grant Thornton International CEO As an addition to the IAB World Survey the essence.
Michael Reiss von Filski, Geneva Group we have, for the first time this year, conduct- Ana Gyorkos
International CEO
Liza Robbins, Morison International CEO ed an anonymous global fee pressure survey ana.gyorkos@timetric.com
Martin van Roekel, BDO International CEO
Jean Stephens, RSM International CEO
Robert Tautges, HLB International CEO
Pauline Wallace, PwC head of public policy and ■■ IAB FEE Overview 2004, 2008, 2013
regulatory affairs
2013 2008 2004
Total market fee income: $169.6bn Total market fee income: $152.8bn Total market fee income: $88.2bn
No. of surveyed org.: 50 No. of surveyed org.: 42 No. of surveyed org.: 30
Big Four market share: 67%
Big Four market share: 67% ($113.8bn) Big Four market share: 70% ($62.3bn)
($102.6bn)
Mid-tier: 33% ($55.8bn) Mid-tier: 30% ($25.9bn)
Mid-tier: 33% ($50bn)
■■ Fee SPlit
Big Four Mid-tier Big Four Mid-tier Big Four Mid-tier
Audit & Accou. Audit & Accou. Audit & Accou. Audit & Accou. Audit & Accou. Audit & Accou.
43% ($48.9bn) 51% ($28.4bn) 53% ($53.9bn) 53% ($26.5bn) 57.5% ($35.8bn) 50% ($10.3bn)
Tax Tax Tax Tax Tax Tax
23% ($26bn) 25% ($13.9bn) 24% ($24.5bn) 23% ($11.5bn) 28% ($17.4bn) 23% ($4.7bn)
Advisory Advisory Advisory Advisory Advisory Advisory
34% ($38.6bn) 24% ($13.4bn) 23% ($22.5bn) 24% ($12bn) 14.5% ($9.3bn) 27% ($5.5bn)
Soure: IAB
www.InternationalAccountingBulletin.com January 2014 y 1
news round-up International Accounting Bulletin
IAB Online – January news round-up
Top 5 articles UK “It is to be expected that this of BDO Auditores Independentes
KPMG UK Co-op Bank audits under FRC investigates KPMG UK’s scrutiny should extend to the audit and BDO Consultores in November
audit of Co-op Bank while recognising that the auditor 2013.
FRC investigation
The UK Financial Reporting Council is independent of the events which While Grant Thornton Brazil has
CC delays remedies implementation (FRC) is to pursue an investigation gave rise to the issues experienced strengthened its position as the
of KPMG UK’s audit work on the by the bank,” KPMG UK commented. fifth-largest firm in the country, it
due to EU audit reform
Co-operative (Co-op) Bank, which “As auditor to the bank we is still less than a third of the size
Deloitte merges with Grant will focus on the preparation, believe that we have provided, of its nearest rival, KPMG, with just
approval and audit of financial and continue to provide, robust over 1,000 staff.
Thornton firm in the Philippines
statements. audits which provide rigorous Grant Thornton International’s
PwC and Booz merger approved challenge to the judgements and Brazil firm reported revenues of
The FRC started making enquiries
disclosures proposed by the bank’s BRL101m ($42m) in 2012.
in relation to the bank’s accounts
KPMG US completes acquisition of management.”
in November. In particular the
Link Analytics GLOBAL
regulator said the enquiries related BRAZIL
to the disclosure in the 2012 annual Praxity grows 9% in 2013
Most retweeted article report of the bank’s regulatory
Grant Thornton turning the Member revenue for global alliance
tables in Brazil Praxity grew 9% to US$4.1bn in
CC delays remedies implementation capital position.
Grant Thornton International has 2013, up from $3.7bn in 2012.
due to EU audit reform Those enquires also related
re-enforced its position as the
to the bank’s loan impairment, While all service lines grew,
Read in 155 countries fifth-largest firm in the market with
impairment of its investment in its management consulting led the
two M&A deals, coming almost four
replacement banking IT platform, way with 27.9% growth to $417m,
UK 29% years after EY acquired Terco Grant
and to fair value disclosures, followed by litigation support, up
US 18% Thornton in Brazil.
according to the FRC. 18.6% to $33.5m.
Singapore 4% The first deal is the acquisition of
The investigation will be carried Praxity’s largest service line, audit
India 4% KMPG Brazil’s outsourcing practice
out in accordance with the FRC’s and accountancy, was up 8.7% to
Hong Kong 3% and the second a merger with
normal procedures and under the $1,976m, while its tax services were
Rest of the world 42% former PKF firm Directa Auditores.
terms of its disciplinary scheme, The acquisition of KPMG’s up 9.8% to 906.4m.
which operates independently of outsourcing practice will add 70 Recovery and insolvency grew
professional bodies. staff and $5.5m in revenues and the 13.1% to $42.9m, while corporate
Co-op Bank has been suffering merger with Directa Auditores adds finance, Praxity’s smallest service
losses attributable largely to its 120 staff. line, grew 12.3% to $32.6m.
2009 takeover of former building Brazil has been a very In North America, member
society Britannia and in the first competitive market in the past revenue was $2,245m, an 11.2%
six months of 2013 the bank lost four years, and in 2010 KPMG rise on 2012, while revenues in
£781m ($1,282m) after tax. Last took over two of the largest mid- Europe were $1,314m, representing
June it emerged that the bank had a tier firms in the market, BDO a growth of 7.5% compared to 2012.
£1.5bn hole in its accounts. Auditores Independentes and BDO Praxity saw its biggest growth in
KPMG UK, the bank’s auditor for Consultores, while EY took over Asia-Pacific, up 11.3% to $349.3m,
Join our online community 30 years, said it is understandable similarly sized Terco Grant Thornton. and Africa and the Middle East
that there should be appropriate In the wake of those deals BDO also saw growth with revenues
regulatory scrutiny, given the high International filed a complaint to of $122.3m, an 8.1% increase.
LinkedIn Group media profile and public interest the local competition authorities Revenues were flat in Latin America,
World Accounting associated with the case. which approved KPMG’s acquisition at $51.5m. <
Intelligence
Twitter Movers & shakers
WAI_News
Grant Thornton US partners Bent Kofoed and Dave Sibits to its Claudio Cifali and Ted Carnevale
and principals have elected Jeff board of directors. have been appointed secretary
Facebook page
Burgess, Nichole Jordan and Brad Kofoed, of Kreston Denmark, and treasurer respectively. Cifali is
World Accounting
Intelligence Preber to the partnership board has been elected as deputy managing partner at Brazilian firm
at the firm’s annual leadership chairman. Cifali e Associados, and Carnevale
meeting. Sibits, president of Kreston is managing partner of US firm
Burgess is the firm’s national member firm CBIZ MHM Financial Gramkow, Carnevale, Seifert &
Scan our QR code for quick
smartphone access to IAB managing partner of professional Services, has been elected to the Co. The other members of the
standards. Jordan serves as New board of directors to represent newly elected international board
York metro assistant managing the North America Region. are: Michael Burnett, partner
partner for industries and markets at Accru Hobart Pty (Australia);
and national banking and securities CPA Associates International has Jeffrey Groen, managing partner
leader. Preber is Grant Thornton elected Hans van den Besselaar as at Groen, Kluka & Company, P.C.
US national managing partner of chairman of the board. He works as (US); James Holmes, managing
forensic and valuation services. managing partner for Dutch firm partner at Vrakas/Blum, S.C. (US)
Wesselman Accountants and Tax and Malcolm McGready, partner at
Kreston International has elected Advisors. Ensors Chartered Accountants (UK).
2 y January 2014 www.InternationalAccountingBulletin.com
International Accounting Bulletin Analysis/firm movements news
reform
EU audit reform to affect UK CC remedies implementation
The UK Competition Commission (CC) is At the end of December the European of audit firms.
to delay the implementation of remedies Parliament, EU Council and the European Following the trialogue agreement in
for the UK audit market, which include Commission reached an agreement which December, the lead parliamentary com-
10 -year mandatory retendering, until determines compulsory rotation of pub- mittee on the reform, the Committee on
more is known about the European audit lic interest entities’ (PIEs) auditors after Legal Affairs (Juri), has passed both the
reform expected to be voted on by the 10 years, after which period it allows the directive and the reform trialogue docu-
European Parliament in February. possibility for member states to allow the ment in early January.
The CC said that the EU reform regula- auditor or audit firm to continue audit of This was the last step before the direc-
tion and directive documents are “likely the same PIEs up to the maximum dura- tive and the regulation are passed on to the
to be finalised and come into force in the tion of 20 years where a public tender- European Parliament for a vote in February.
second quarter of 2014” and the watch- ing is conducted. Juri has been working on the audit
dog said it is: “keen to follow the prin- The agreement also proposes a 70% cap reform brief since the end of 2011, when
ciples of better regulation including by on the fees earned for non-audit services the European Commission passed-on the
ensuring that our orders do not contradict rendered to an audit client. Therefore an initial document.
or duplicate EU regulation. Therefore, in audit firm would not be able to tender for The MEP responsible for the audit reform
the light of these developments we have non-audit services worth more than 70% package , Sajjad Karim, said: “Reform of
extended our administrative timetable of the audit fee. the audit market has been long overdue
to enable us to consider fully the impli- Prior to the EU consensus, the CC and the proposals that were voted through
cations of the EU proposals on our own announced in September that UK audit are unprecedented. This draft piece of leg-
orders. We anticipate further rounds of firms will have to retender their FTSE islation will have positive ramifications,
consultation on our revised orders in the 350 audits at least every 10 years. How- not just for the audit market, but for the
third quarter of 2014 and a commence- ever the regulator did not find enough financial sector as a whole. We are rebuild-
ment date in quarter four.” evidence to support mandatory rotation ing confidence one step at a time.” <
FirmMovements
The partners of global consultancy social network analysis, and with annual revenues of PHP1.2bn firms has traditionally focused on the
Booz & Co have agreed to the business-process optimisation. ($26.8m), according to the firms. medium-sized market, in particular
company’s proposed merger with PwC. owner-managed companies.
Punongbayan & Araullo (P&A) and Baker Tilly International US firm MSI Global Alliance has added
A preliminary merger agreement was
Navarro Amper & Co (NA&Co), the BlumShapiro and German firm firms from Kenya, India, the United
reached in October and now it’s been
member firms of Grant Thornton Baker Tilly Roefls have completed a Arab Emirates, Colombia and the US
formally agreed, the transaction is
International and Deloitte in the merger and acquisition respectively. to its international association.
expected to be completed by March.
Philippines respectively, have BlumShapiro’s merger is
The branding for the combined
agreed to merge. with firm Friedman, Suvalle Geneva Group International (GGI)
business, under the PwC umbrella, is
In a statement the firms said & Salomon PC (FSS), based in has added Dansk Revision, an
still to be jointly determined and will
they have signed a memorandum Newton, Massachusetts. FSS has accounting and audit firm based in
be announced in the coming months.
30 staff, and its services include Farum, Denmark to its association.
Booze & Co has 3,000 staff in 57 of agreement, which will lead
consulting, accounting, tax and Dansk Revision has more than
offices worldwide. In 2012 it reported to a definitive one, with the aim
financial services. 500 employees, 28 offices and is
of combining ”their respective
about $1.4bn in revenue. In Germany, Baker Tilly Roefls the sixth-largest firm in Denmark
professional practices” in the
has acquired Dusseldorf and Leipzig according to GGI. GGI also added
KPMG US has completed the Philippines, effective in July. In the
firm Karl Berg, and its affiliated Contax, an Austrian firm, to
acquisition of analytical solutions meantime the two firms said they will
companies Bedenbecker & Berg in its association.
company Link Analytics. conduct due diligence work and set
Essen and KSR in Ennepetal.
The acquisition was first up an integration plan to ”ensure a Mazars has merged with Singapore-
announced on 18 December and smooth, seamless transition”. RBS RoeverBroennerSusat (RBS), based advisory firm TransFingo.
financial terms were not disclosed. The merged firm, Punongbayan German member firm of Moore TransFingo was formed in 2003
Link Analytics specialises in Amper & Co (PA&Co), will be a Stephens International, and and focuses on business process
developing scalable business member firm of Deloitte, and once independent firm Haag Eckhard outsourcing and business process risk
analytics applications, including the merger is finalised, it will be Schoenpflug (HES) merged on consulting for multinationals, listed
customer experience, large-scale one of the top firms in the country 1 January. The client base of both and non-listed clients.
www.InternationalAccountingBulletin.com January 2014 y 3SurveY World Survey 2014 International Accounting Bulletin
Who dares wins...
The coming year promises to be fiercely
competitive for the profession as networks
and associations battle for survival and growth
against a backdrop of mergers and acquisitions
and pending market reform
4 y January 2014 www.InternationalAccountingBulletin.comInternational Accounting Bulletin World Survey 2014 Survey
W
hile a meteoroid breaking up network TGS Global, which is ranked as four years. Collier-Keywood says: “This
and falling from the sky in Rus- the 20th largest with fee income of $157.8m has played a major role in Europe and
sia and the US National Security in the year to 31 December 2013, Shinew- I would also point to the slowdown in
Agency reading our text mes- ing CPA a Chinese international network growth last year in many of the emerging
sages might be the most memorable news ranked at number 19, with revenues of markets that have their own difficulties.
moments of 2013, the accounting market is $161m. Among associations the new addi- Emerging market really didn’t grow so well
more likely to remember headlines of large- tion was Key Will Group, a Chinese-led, but last year. I think these were the main rea-
scale accounting firm M&A deals and man- London-based, association. sons for challenges in organic growth for us
datory rotation becoming a more and more in the past year.”
real remedy for the concentration levels in Changes at the top Third-ranked EY and fourth KPMG both
the audit market. Deloitte has, for the second time in the past kept their market position and reported 6%
Following last year’s decent perfor- three years, claimed the title of largest glob- and 2% global growth respectively
mance – 6% overall market growth – many al accountancy network, reporting global EY global managing partner – client
accounting networks and associations revenues of $32.4bn in the year to 31 May service Carmine Di Sibio says the firm’s
looked actively towards future strategy and 2013, up 3.5% year on year. In second place growth in the past year, which was almost
ways to grow in 2013. For many this has PwC reported global revenues of US$32.1bn entirely organic, is in line with the firm’s
meant M&A, adding member firms and in the year to 30 June 2013. Vision 2020 strategy and its aim to increase
finding strategic alliances. Despite the surge Deloitte and PwC have been neck and global revenues to $50bn in the next six
in activity, International Accounting Bul- neck in the past few years, with Deloitte years. He says this means the firm will have
letin surveyed networks and associations – drawing ahead of PwC for the first time ever, to grow by more than 10% on average each
50 in total – reported an average growth of by just $9m, in 2010. Deloitte’s lead was year, which he thinks will be achieved by a
only 3%, to a combined $169.7bn. short-lived as in 2011 and 2012 PwC yet combination of organic and M&A growth.
again claimed the global number one spot. Di Sibio also tells IAB that the firm will
Even growth It’s likely the tight race to become num- continue its work towards a highly inte-
It was not only the overall growth that ber one will continue as PwC announced grated global practice, which in his opin-
stood at 3% – both networks and asso- in October a merger agreement with global ion sets the firm apart from some of its
ciations reported 3% average growth. For consultancy Booz & Company, which was close competitors.
networks this was a decrease from the 6% fully approved by Booz & Company part- KPMG has had a better year in 2013
growth figure last year and can mainly be ners in December and is currently pending with its 2% growth, as in 2012 it was the
attributed to challenges surrounding organ- regulatory approval. The deal is likely to only Big Four firm to report a decrease in
ic growth in audit and tax. add 3,000 staff and more than $1bn in advi- annual revenues.
Associations’ revenues were flat in 2012 sory revenues to the firm, which potentially
and the 3% growth in 2013 can be attribut- will allow it to take over the top spot from The mid-tier
ed to new members being added, especially Deloitte yet again. In the mid-tier arena 2013 proved to be
from developing markets, and M&A activ- PwC vice-chairman Richard Collier- a very interesting year, especially due to
ity among existing members. Keywood says organic growth has been the large number of firm moves and gen-
The IAB 2014 World Survey ranking challenging for the firm in the past year eral consolidation of the market, which was
includes 25 networks and 25 associations, due to the economic environment its clients most apparent among mid-tier networks.
with three new additions to the ranking: have been subject to for the past three to BDO, the fifth-largest global network,
enjoyed another year of strong growth
which was both organic and external. It
■■ Revenue vs. Growth reported a fee income increase of 7% to
$6.4bn in the year to 30 September 2013.
$bn Revenue (left axis) % BDO’s fee income also includes $1.4bn
200 Growth 20 from alliance members, mainly from the
15 US. Several mid-tier networks have alliance
150 members due the structure of the US market
10 and strict vicarious liability laws.
5
For Grant Thornton International, 2013
100
meant another year of strong growth, with
0 revenues up 8% to $4.5bn. The 8% growth
50
-5 makes Grant Thornton the best-performing
top 10 network in 2013.
0 -10 T he net work’s ch ief executive E d
03 04 05 06 07 08 09 10 11 12 13
20 20 20 20 20 20 20 20 20 20 20 Nusbaum says the growth comes for
variety of sources. He says: “We’ve had a
Source: International Accounting Bulletin
tremendous amount of success winning
www.InternationalAccountingBulletin.com January 2014 y 5Survey World Survey 2014 International Accounting Bulletin
multinational clients, that includes audits
■■ Market Share as well as advisory and tax work. A big
chunk of our growth has come from the
advisory practise. We’ve done M&As that
have helped – in the Netherlands, the US
and one in the UK and, of course, recently
in South Africa with the PKF practice etc.”
Most organisations have yet again been
PWC 19% affected by the robust US dollar, which has
been especially strong against certain cur-
Mid-tier rencies from the emerging markets.
33% Baker Tilly International chief executive
Geoff Barnes says the network, the eighth-
largest, reported an increase in revenues
of 3%, “which in the market in which we
Deloitte 19% are operating is good and also we report
in US dollars, which is very strong against
some currencies”.
“In several countries we have seen really
good growth in local currency, but when
KPMG EY converting to US dollars the numbers were
13% 14% good but not as outstanding,” Barnes says.
Baker Tilly International numbers also
don’t include the revenues from RSM Tenon
in the UK, which Baker Tilly UK bought at
Source: IAB
the end of the summer in a pre-pack deal.
Mainly due to the loss of its only UK firm,
RSM reported a 7% decrease in fee income
to $3.7bn. RSM chief executive Jean Ste-
■■ Average fee split Top 10 networks in 2008 and 2013 (%)
phens also says the network cancelled its
2008 2013 membership with a Canadian firm, which
Audit & accounting 53 48 was based on mutual agreement .
Tax 23 23 Stephens says that the network has seen
Advisory 24 29 growth across all regions apart from Africa
and the Middle East partly due to conver-
■■ Average fee split Big Four in 2008 and 2013 (%)
sion rate which brought the revenues down.
“The numbers don’t show it, partly
2008 2013
because of Tenon, but we had a fantastic
Audit & accounting 52 43
year in 2013,” she says.
Tax 24 23
“We have been consistent from quarter to
Advisory 24 34 quarter and managed to grow our interna-
■■ Service Line Fee Split: Advisory *
■■ Service Line Fee Split: Audit & Accounting ■■ Service Line Fee Split: Tax
$m %
$m % $m %
Deloitte 13,200.0 8%
PwC 14,760.0 0% PwC 8,175.0 3%
PwC 9,153.0 5%
Deloitte 13,100.0 0% EY 6,946.0 9%
KPMG 8,240.0 5%
EY 10,936.0 0% Deloitte 6,100.0 12%
EY 7,947.0 12%
KPMG 10,210.0 –1% KPMG 4,970.0 2%
Grant Thornton International 1,636.0 19%
BDO 3,829.2 5% RSM 1,095.8 –5%
BDO 1,328.7 7%
Grant Thornton International 1,958.0 3% BDO 1,295.0 15%
Crowe Horwath International 805.9 5%
RSM 1,861.2 –2% Grant Thornton International 925.0 2%
Baker Tilly Intenrational 858.6 23%
Baker Tilly International 1,700.9 –3% Baker Tilly International 844.7 –2%
RSM 757.0 –13%
Nexia International 1,692.4 4% Crowe Horwath International 743.5 1%
Nexia International 612.8 3%
Crowe Horwath International 1,574.5 0% Moore Stephens Intenrational 705.4 -
Notes: Includes all fees earned from services that are not audit & accounting
Source: International Accounting Bulletin Source: International Accounting Bulletin
and tax. Source: International Accounting Bulletin
6 y January 2014 www.InternationalAccountingBulletin.comInternational Accounting Bulletin World Survey 2014 Survey
tional client base. Sim ad mits the net work has been year ending 31 December.
Stephens says she expects M&A in the somewhat “under attack” by networks like In line with 2012, 2013 was an eventful
coming year which will involve special- BDO and Grant Thornton International. year for M&A and firm movement among
ist firms to “deepen RSM’s capabilities in However he believes PKF has successfully accounting firms. As developed economies
key areas”. Asked about the situation after replaced some of its lost members with have only started to see the first signs of
the loss of Tenon she replies: “The UK is a quality firms, and says the strength of the recovery, external growth was the strategy
challenging market and we are continuing PKF brand has helped in this process. of choice for many. In emerging economies,
discussions and hopefully we’ll be able to As a result, however, PKF International’s where businesses are looking to strengthen
announce something soon.” strategy is moving away from the single their international presence there has also
coverage model, as in most countries it is been a fair share of activity as firms look for
Difficult year looking for multiple members to replace strong international links.
Another network to suffer consecutive chal- some of the loses.
lenging years was PKF International, which As a result of the changes PKF Inter- Expansion strategy
reported a 6% decrease to $2.5bn in the national also slipped down a place in the In 2013, BDO continued its expansion
year to 30 June. IAB ranking and has been overtaken by strategy, started in 2012 with the takeover
PKF international lost several large mem- Moore Stephens International, which had of PKF International’s Sydney firm in Aus-
ber firms in the year. However due to the a strong year with a 17% revenue increase tralia. Since then the network has merged
six-month notice period that firms have, mainly attributed to the growth in China, or acquired several PKF firms in different
and some deals happening just before the where it added several new members, and geographies and most notably finalised the
year-end or just after, PKF International organic growth. merger with PKF UK in April 2013, creat-
included those revenues when reporting to ing one of the nation’s top mid-tier firms.
the IAB. Associations BDO International’s Van Roekel says the
While some might have speculated that Among associations only five of the 25 merger in the UK was confirmation that a
the loss of PKF UK to BDO UK at the end reported a revenue decrease due to mem- consolidation was going on in the global
of 2012 and several other deals would mean bers lost. There have been several changes accounting market.
the end of the network, chief executive John in the ranking, with Praxity retaining “We had various M&As which created
Sim says the network will “by mid 2014 be top spot as the largest global association. a momentum and made member firms in
where we used to be”. Praxity includes the Mazars and Shinew- our network realise even more clearly that
“We have replaced several of the members ing networks fee income in its association. deals can happen,” he says. “And this has
we lost and some of them are still to leave There was a change in third place where encouraged other firms to be more active in
and are currently operating as part of their GGI Geneva Group International overtook M&A transactions.”
six-month notice,” he says. PrimeGlobal with revenues of $2bn for the Following the merger, PKF Internation-
al was left without a member firm in the
UK and in the past 12 months it has added
■■ WORLD SURVEY 2014
three replacement firms to its UK network:
Average growth of firms by country
London-based firm PKF Littlejohn, PKF
2012 (%) 2013 (%) 2013 GDP growth (%)
Cooper Parry and Johnston Carmichael.
Turkey 35 17 3.4 PKF International’s Sim says that the
China 28 37 8.0 network intends to grow “a bigger net-
South Africa 10 6 2.8 work of firms in the UK than we had
Australia 9 –2 2.9 before with PKF UK”.
The second deal to resonate in the market
Mexico 8 6 3.4
also took place in the UK mid-tier market.
South Korea 2 0 2.8
In August, Baker Tilly UK bought RSM
UK 6 5 0.7
Tenon in a pre-pack deal after the firm went
Spain 3 0 –1.0 into administration. The financial impact
Russia 11 18 3.4 of this acquisition is still unknown but IAB
Japan 3 2 1.6 estimates Baker Tilly UK could potentially
Canada 8 4 1.5 double its existing fee income and head-
France 4 1 –0.1 count, which would put it into the race for
US 8 11 1.8
the largest mid-tier network spot in the UK.
The deal has left RSM in search of a new UK
Italy 7 6 –1.5
member firm. Stephens remains tight-lipped
Germany 4 5 0.6
regarding the network’s plans for the UK.
Netherlands 1 –3 –0.5
But the UK wasn’t the only hot spot for
World 5 3 2.7(e) M&A. Emerging markets in Asia and Latin
Notes: Growth rates are taken from International Accounting Bulletin country surveys in 2013
America have witnessed some movements,
www.InternationalAccountingBulletin.com January 2014 y 7Survey World Survey 2014 International Accounting Bulletin
as well as Africa where the Big Four, mid- BDO adding a member firm in Ethio- Group added several member firms world-
tier networks and global associations have pia, R SM in Nigeria, and Nex ia in wide with a particular focus on Central and
increasingly started to look for opportuni- Uganda and Egypt. Eastern Europe, as well as in Africa and the
ties. Associations have also increased their Middle East.
Especially, in South Africa a lot has hap- interest in Africa. HLB International added
pened, with, for example, PKF International member firms in Tanzania and Niger, while Chinese strategy
losing member firms to Mazars and Grant GGI Geneva Group International added a In Asia, one of the main deals of the year
Thornton International. Mazars chief exec- member in Zimbabwe, and Abacus World- happened in China where RSM China
utive officer Philippe Castagnac says: “We wide added the association’s first African and Crowe Horwath China merged creat-
have now a very comfortable position in firm in Nigeria. ing a firm of 344 partners and 2,600 staff
South Africa thanks to our expansion. And The Key Will Group, a new association and annual revenues of about CNY2.8bn
we are quite pleased because we now have a appearing in the IAB ranking was particu- ($457m) in May. According to the Chinese
footprint in this part of the world where we larly active in gaining additional members Institute of Certified Accountants data for
didn’t use to be.” in 2013. It reported one of the highest 2013, the new firm, rebranded as Ruihua,
Other mid-tier networks have reported growths, 83%, among surveyed association will be larger by fee income in Mainland
movement across the continent, such as and networks. In the past year, Key Will China than EY and KPMG.
■■ WORLD SURVEY 2014
Networks: fee data
Fee split (%)
Corporate
Rank Revenue Growth Audit & Tax Management Corporate recovery/ Litigation
2013 Name ($m) rate(%) Accounting services consulting finance Insolvency support Other Year-end
NETWORKS
1 Deloitte* 32,400.0 4% 40 19 32 9 - - - May-13
2 PwC* (1) 32,088.0 2% 46 25 - - - - 29 Jun-13
3 EY* 25,892.0 6% 42 27 22 9 - - - Jun-13
4 KPMG* (1) 23,420.0 2% 44 21 - - - - 35 Sep-13
5 BDO (1)(2) 6,453.1 7% 59 20 - - - - 21 Sep-13
6 Grant Thornton International* 4,519.0 8% 43 21 - - - - 36 Sep-13
7 RSM International (3) 3,714.1 –7% 50 30 14 - - - 6 Dec-13
8 Baker Tilly International* 3,404.2 3% 50 25 10 3 4 1 7 Jun-13
9 Crowe Horwath International 3,168.2 3% 50 24 12 1 0 1 12 Dec-13
(4)
10 Nexia International* 2,918.0 3% 58 21 9 1 1 1 9 Jun-13
11 Moore Stephens International* 2,682.1 17% 52 26 8 3 1 1 9 Dec-13
12 PKF International (5) 2,523.0 –6% 53 26 9 2 2 1 7 Jun-13
13 Kreston International* 1,944.6 –1% 46 29 9 2 2 0 12 Oct-13
14 HLB International* 1,678.6 7% 49 23 12 2 2 1 11 Dec-13
15 Mazars* 1,377.2 6% 50 12 - - - - 38 Aug-13
16 UHY International* 649.5 4% 61 18 9 2 1 1 9 Dec-13
17 Russell Bedford International* 383.0 0% 55 20 12 - - - 13 Jun-13
18 ECOVIS International* (6) 359.7 28% 37 26 11 1 1 2 22 Dec-13
19 Shinewing CPA* 161.3 30% - - - - - - - Jun-13
20 TGS Global* 157.8 - 64 14 12 1 1 1 7 Dec-13
21 Reanda International (7) 121.9 31% 66 8 10 - 4 - 12 Dec-13
22 IECnet* 115.5 0% 57 22 5 11 - 2 3 Jun-13
23 Auren* 99.7 –1% 41 40 17 2 - - - Dec-13
24 SMS Latinoamérica (8) 67.8 5% 47 28 18 1 3 - 3 Dec-13
25 UC&CS América* 46.4 45% 62 28 10 - - - - Dec-13
Total revenue/growth 150,344.6 3%
Notes: (1) Other includes advisory revenues; (2) BDO revenue includes $1.4bn from from alliance firms; (3) RSM International revenue include $44.9m from alliance firms; (4) Crowe Horwath International revenue include $754m from alliance firms; (5) PKF
International revenues include fee income of firms the network has lost prior to year-end due to members operating on a six-month cancelation notice; (6) ECOVIS International does not include fee income of associated US partners. If it were to, the combined
revenue of the network would be $536.8m; (7) Reanda International revenue include $7.3m from correspondent and non-exclusive firms; (8) SMS Latinoamérica revenue includes $2.5m from correspondent and non-exclusive firms.
Source: International Accounting Bulletin
8 y January 2014 www.InternationalAccountingBulletin.comInternational Accounting Bulletin World Survey 2014 Survey
Shortly after the merger announcement, likely make a choice, eventually, between size, probably making it the second-largest.
Ruihua requested to be a member of both networks, but I also believe the time frame The Danish market has been known as
RSM International and Crowe Horwath for that choice is months, if not years.” fiercely competitive, with PwC merging
International. Both organisations said the For the Big Four it’s also been an eventful with Grant Thornton Denmark in 2011,
situation is specific to China and that the year in terms of M&A. In November, EY followed by Grant Thornton adding PKF
networks will, in all other markets, “remain and KPMG signed a merger agreement in Kresten Foged as its member. KPMG is yet
mutually respectful competitors”. Denmark, with the newly merged firm look- to announce a replacement firm.
When questioned on what the future may ing to operate under the EY name in a deal Shortly after the merger in Denmark
hold, Crowe Horwath International chief that’s still subject to regulatory approval. was announced, the Brazilian Competition
executive Kevin McGrath tells IAB: “My Prior to the merger, EY Denmark was Authority (CADE) approved KPMG’s acqui-
guess is that Ruihua will look at its working ranked as the fifth-largest firm in the coun- sition of BDO Auditores Independentes and
relationship with both networks and will try and the merger will more than double its BDO Consultores in Brazil, over two years
■■ WORLD SURVEY 2014
Associations: fee data
Fee split (%)
Corporate
Rank Revenue Growth Audit & Tax Management Corporate recovery/ Litigation
2013 Name ($m) rate(%) Accounting services consulting finance Insolvency support Other Year-end
ASSOCIATIONS
1 Praxity 4,082.9 10% 48 22 11 1 1 1 16 n/a
2 LEA Global/Leading Edge 2,909.8 7% 47 33 14 2 1 2 1 Dec-13
Alliance (1)
3 GGI Geneva Group International 2,028.0 5% 28 30 23 6 5 4 4 Dec-13
(2)
4 PrimeGlobal 1,806.2 –11% 55 23 9 3 1 2 7 May-13
5 AGN International 1,667.0 4% 56 22 - - - - 22 Oct-13
6 BKR International 1,360.0 2% 56 31 1 - - - 12 Jun-13
7 DFK International (3) 1,093.1 1% 50 28 6 2 3 4 7 Sep-13
8 IAPA (4) 1,073.4 2% - - - - - - - n/a
9 Morison International 772.9 7% 59 17 5 5 3 3 9 Dec-13
10 CPA Associates International 654.0 2% 47 32 12 - - - 9 Oct-13
11 MSI Global Alliance 623.9 12% 54 25 8 2 1 1 8 Dec-13
12 MGI 558.0 15% - - - - - - - Jun-13
13 KS International 349.0 8% 50 18 8 2 2 2 18 n/a
14 JHI Association 344.3 0% 44 35 7 2 1 1 1 Dec-13
15 Integra International 295.1 –1% 45 30 20 - 2 3 - Oct-13
16 Enterprise Worldwide 292.8 0% 40 38 13 - - - 9 Dec-12
17 INPACT 270.9 –11% 53 28 12 1 1 1 5 Dec-12
18 EuraAudit International 239.1 –18% 67 17 7 - 1 - 8 Dec-13
19 ANTEA 236.7 10% 44 26 18 1 1 6 4 Dec-13
20 GMN International 175.7 5% 48 36 8 1 0 1 6 Sep-13
21 Parker Randall International 134.4 1% 55 25 15 5 - - - Dec-13
22 UC&CS Global 86.0 –49% 50 37 13 - - - - Dec-13
23 Key Will Group 34.8 83% 62 15 9 - - - 13 Dec-12
24 ACEE 24.1 2% 50 20 - - - 25 5 Dec-13
25 Abacus Worldwide 15.3 351% 44 23 12 3 1 3 14 Dec-13
Total revenue/growth 21,127.6 3%
Notes: Income contributions from correspondent and non-exclusive member firms may be included in total fee income. (1) LEA Global/Leading Edge Alliance fee income includes $225m from non-exclusive firms; (2) GGI Geneva Group International figures refer
only to accounting/audit firms within GGI and not law firms; (3) DFK fee income includes $12.2m from correspondent and non-exclusive firms; (4) IAPA fee income includes $115.3m from correspondent and non-exclusive firms.
Source: International Accounting Bulletin
www.InternationalAccountingBulletin.com January 2014 y 9SUrvey World Survey 2014 International Accounting Bulletin
after the deal was first announced. and will continue to make headlines in the Mazars’ Castagnac believes that “mid-
Pr ior to K PMG ’s acqu isit ion , EY coming years. The reason behind the trend, tier major players such as Grant Thornton,
acquired Terco, a former Grant Thornton Nusbaum of Grant Thornton International BDO and Mazars will certainly not disap-
International member firm in Brazil, which says, is that mid-size and smaller business pear”. For the others he says it could happen
meant two of the largest mid-tier firms were are becoming much more international and but “certainly not in the short term”.
bought out in the space of a year by two have needs in different countries where their Baker Tilly International’s Barnes shares
of the Big Four firms, which raised ques- auditors will have to service. this analysis. “There have been merg-
tion on the effect of the concentration of ers between smaller global organisations
the audit market. Fewer mid-tier networks before,” he says. “But not in this mid-tier
Despite validating the acquisition, the But interviewed firm leaders remain divided region and it’s a jolly difficult thing to think
CADE imposed some restrictions on KPMG on whether or not this consolidation trend how one would do that.”
Brazil’s future acquisitions for the next four will see the end of one of the major mid-tier
years. The CADE also issued some recom- brands in the market. “Within the next five Audit
mendation for the rest of the Big Four. years there will only be two or three sub- Despite Deloitte overtaking PwC to become
All interviewed firm leaders agreed the stantial mid-tier networks globally,” BDO’s the largest firm by revenue over the past 12
trend of consolidation is far from over Van Roekel predicts. months, PwC’s audit and accounting ser-
■■ WORLD SURVEY 2014
Networks: staff data
Rank Name Total staff Partners Professional staff Administrative staff Offices
2013
2013 2012 Growth 2013 2012 2013 2012 2013 2012 2013 2012
(%)
NETWORKS
1 Deloitte* 202,885 193,359 5 10,189 9,948 157,505 148,947 35,192 34,464 677 655
2 PwC* 184,235 180,529 2 9,597 9,359 143,111 139,723 31,527 31,447 776 776
3 EY* 174,808 167,225 5 9,468 9,129 130,569 124,735 34,771 33,361 700 726
4 KPMG* 155,180 152,390 2 8,664 8,624 119,675 117,190 26,841 26,576 700 700
5 BDO 56,389 54,933 3 4,908 4,778 43,461 41,979 8,020 8,176 1,264 1,204
6 Grant Thornton International 38,543 35,809 8 2,907 2,839 28,735 26,987 6,901 5,983 696 638
7 RSM International* 31,896 32,757 –3 2,871 3,126 23,657 23,947 5,368 5,684 678 702
8 Crowe Horwath International 29,414 29,239 1 3,352 3,335 21,363 21,335 4,699 4,569 684 671
9 Moore Stephens 27,081 21,224 28 2,636 2,312 19,595 15,273 4,850 3,639 667 624
International*
10 Baker Tilly International* 26,846 25,667 5 2,754 2,650 19,754 18,986 4,339 4,031 738 672
11 Nexia International* 23,131 22,161 4 2,739 2,600 15,774 15,261 4,618 4,300 604 581
12 PKF International 22,543 21,978 3 2,660 2,276 15,383 16,681 4,500 3,021 385 440
13 Kreston International* 20,090 21,009 –4 1,504 1,448 15,645 16,303 2,941 3,258 623 640
14 HLB International* 16,474 15,811 4 1,701 1,754 12,090 10,878 2,683 3,179 455 479
15 Mazars* 13,746 13,161 4 742 727 11 047 10,413 1,957 2,021 250 236
16 UHY International* 7,661 7,134 7 789 768 5,693 5,210 1,179 1,156 275 266
17 Russell Bedford 5,198 4,967 5 613 549 3,750 3,751 835 667 241 240
International*
18 ECOVIS International* 4,610 4,326 7 657 597 3,425 3,295 528 434 262 263
19 Shinewing CPA* 4,500 - - 150 - - - - - 24 25
20 UC&CS América* 2,075 2,196 –6 213 170 1,533 1,635 329 391 126 146
21 SMS Latinoamérica* 1,913 1,873 2 167 162 1,597 1,571 149 140 48 40
22 Reanda International 1,882 2,195 –14 105 109 1,549 1,829 228 257 70 42
23 TGS Global* 1,852 - - 152 - 1,463 - 237 - 141 -
24 IECnet* 1,682 1,418 19 213 219 1,164 977 305 222 124 118
25 Auren* 1,285 1,314 –2 190 191 998 1,024 97 99 46 45
Totals 1,055,919 1,012,675 0 69,941 67,670 787,489 767,930 183,094 177,075 11,254 10,929
Notes: *Disclaimer = Only data from the exclusive member firms within the network or association is included. Data relating to correspondent and non-exclusive member firms is not included
Source: International Accounting Bulletin
10 y January 2014 www.InternationalAccountingBulletin.comInternational Accounting Bulletin World Survey 2014 Survey
vice line remained $1.66bn ahead of its In the same five-year period fee income PKF’s Sim agrees, specifically highlight-
closest competitor, with both firms report- earned from advisory services by the top 10 ing the Big Four trying to gain work from
ing more or less flat revenues. grew 12%. Advisory appears to have been mid-tier clients, which he says has led to an
Overall, for the top 10 IAB surveyed net- the service line growing at the expense of increase in price lowballing across the board.
works, the year saw a continuation of the audit, accounting for 29% of all revenue
trend of audit and accounting amounting in 2012, compared to 24% in 2008. Tax Audit reform finally at an end
to less of the total revenue. accounted for 23% of overall revenues in After several years of negotiations, in
According to IAB historical data, in 2008 2008 as well as in 2013. December 2013 the Lithuanian presidency
audit and accounting accounted for 53% of Fee pressure is undoubtedly at least partly of the Council of the European Union and
all fee income earned by the 10 largest net- to blame for the declining revenues in audit. the European Parliament reached an agree-
works. However this year’s survey shows it According to Morison International chief ment on the framework of EU audit reform.
only accounts for 48% of overall revenues executive Liza Robbins, there are two areas Later in December the Committee of
of the top ten networks. This means that where fee pressure is coming from. “Clients Permanent Representatives (COREPER)
in the past five years, revenues from audit are looking to cut costs, and we have seen approved the agreement, which was subse-
and accounting only grew from $65.2bn to many examples of larger firms slashing quently endorsed by the Committee on Legal
$66.7bn – just 2%. audit costs to buy market share,” she says. Affairs (Juri), this month. (see page 16)
■■ WORLD SURVEY 2014
Associations: staff data
Rank Name Total staff Partners Professional staff Administrative staff Offices
2013
2013 2012 Growth 2013 2012 2013 2012 2013 2012 2013 2012
(%)
ASSOCIATIONS OF INDEPENDENT FIRMS
1 Praxity 33,496 31,591 6 2,711 2,768 25,425 23,586 5,360 5,237 613 559
2 LEA Global/Leading Edge 23,090 25,459 –9 2,056 2,175 16,640 18,854 4,394 4,430 586 459
Alliance
3 PrimeGlobal 18,132 19,573 –7 2,063 2,189 13,133 13,738 2,933 3,646 793 764
4 GGI Geneva Group 14,583 12,897 13 1,411 1,303 - - - - 643 592
International
5 AGN International 11,835 10,646 11 1,306 1,292 8,155 7,494 2,374 1,860 476 465
6 BKR International 11,518 11,275 2 1,515 1,403 8,702 8,679 1,301 1,193 587 583
7 DFK International 10,934 10,571 3 1,194 1,188 7,869 7,601 1,867 1,782 388 386
8 Morison International 8,697 8,744 –1 832 820 6,359 6,321 1,506 1,603 247 251
9 CPA Associates International 7,416 7,466 –1 833 870 5,366 5,414 1,217 1,182 321 314
10 MSI Global Alliance 7,303 5,746 27 784 728 5,157 3,806 1,362 1,212 195 152
11 MGI 6,813 5,700 20 853 764 3,869 2,988 2,091 1,948 327 294
12 IAPA 6,774 7,357 –8 836 872 3,891 4,043 2,047 2,442 328 300
13 KS International 4,070 3,670 11 432 394 2,877 2,397 761 879 165 153
14 INPACT 3,853 4,055 –5 534 571 2,824 2,976 495 508 232 248
15 JHI Association 3,596 3,580 0 479 472 2,515 2,526 602 582 173 169
16 Integra International 3,468 3,298 5 440 411 2,453 2,330 575 557 192 189
17 EuraAudit International 3,118 2,878 8 390 384 2,236 2,131 492 363 260 238
18 ANTEA 3,016 2,782 8 433 404 2,233 2,069 350 309 149 142
19 GMN International 2,634 2,817 –6 303 308 1,923 2,049 408 460 131 118
20 UC&CS Global 2,358 3,078 –23 281 377 1,716 2,183 361 518 179 231
21 Parker Randall International 1,618 1,559 4 210 211 1,274 1,214 134 134 101 102
22 Enterprise Worldwide 1,272 - - - - - - - - -
23 Key Will Group 1,164 573 103 93 56 925 440 146 77 86 50
24 Abacus Worldwide 250 155 61 37 20 146 110 67 25 18 7
25 ACEE 187 183 2 37 36 121 119 29 28 27 27
Totals 191,195 189,359 2 20,253 20,495 126,645 125,494 31,118 31,776 7,308 6,966
Notes: Income contributions from correspondent and non-exclusive member firms may be included in total fee income.
Source: International Accounting Bulletin
www.InternationalAccountingBulletin.com January 2014 y 11Survey World Survey 2014 International Accounting Bulletin
2013 regional breakdown
■■ Revenue and staff split by region
Mid-tier ■■ North America ■■ Latin America
Name Rev Staff Name Rev Staff
6%
Mid-tier networks mid-tier networks
28%
15% 5 BDO 2,559.6 16,308 5 BDO 194.9 3,907
27%
2% 6 RSM 2,401.9 13,014 6 Grant Thornton International 169.0 3,784
44%
7 Grant Thornton International 1,871.0 10,722 7 RSM 98.7 2,419
4%
35% 8 PKF International 1,517.0 8,328 8 Crowe Horwath International 96.2 2,618
8%
9 Crowe Horwath International 1,481.0 7,838 Moore Stephens
9 77.3 2,708
International
31% 10 Baker Tilly International 1,450.1 7,913
10 Baker Tilly International 75.8 1,754
Clockwise: 11 Nexia International 1,414.0 7,797
11 SMS Latinoamérica 67.8 1,913
North America Asia-Pacific Moore Stephens
12 1,075.4 5,653
Latin America Middle East International 12 Russell Bedford International 56.0 1,537
and Africa
Europe 13 Kreston International 795.9 3,876 13 Kreston International 53.8 1,681
Outer ring: Staff
Inner ring: Fee 14 HLB International 487.2 3,008 14 PKF International 51.0 1,402
Source: International Accounting Bulletin 15 UHY International 206.5 1,086 15 Nexia International 47.5 1,371
Source: International Accounting Bulletin Source: International Accounting Bulletin
■■ North America ■■ Latin America
■■ Revenue and staff split by region
Big Four Name Rev Staff Name Rev Staff
associations associations
1 Praxity 2,245.2 11,905 LEA Global/Leading Edge
1 67.9 1,676
16% LEA Global/Leading Edge
Alliance
2 1,885.8 10,357
Alliance 2 Praxity 51.5 1,032
20% 3 PrimeGlobal 729.3 4,096 GGI Geneva Group
37% 3 50.0 -
4 AGN International 697.4 4,234 International (e)
33%
GGI Geneva Group 4 UC&CS Global 46.4 2,075
5 619.0
International (e) 5 PrimeGlobal 40.1 1,147
6 DFK International 526.8 3,174 6 DFK International 38.5 1,156
47% 7 IAPA 366.8 1,826 7 KS International 38.2 448
CPA Associates 8 CPA Associates International 38.0 1,297
8 289.0 1,815
47% International
9 ANTEA 32.4 808
9 MSI Global Alliance 202.8 1,256
10 JHI Association 31.6 793
10 JHI Association 164.8 917
Clockwise: 11 AGN International 28.8 480
Outer ring: Staff 11 MGI 157.0 967
Americas Inner ring: Fee 12 MGI 22.6 963
12 Morison International 127.1 683
EMEA 13 Integra International 110.4 725
13 Morison International 20.0 545
Asia-Pacific 14 INPACT 86.7 642
14 MSI Global Alliance 17.8 482
15 KS International 67.8 378 15 Parker Randall International 17.6 290
Source: International Accounting Bulletin Notes: (e) IAB estimation, Source: International Accounting Bulletin Notes: (e) IAB estimation, Source: International Accounting Bulletin
12 y January 2014 www.InternationalAccountingBulletin.comInternational Accounting Bulletin World Survey 2014 Survey
■■ The big four
North America Latin America Europe Africa/Middle East Asia-Pacific
Rev Staff Rev Staff Rev Staff Rev Staff Rev Staff
Deloitte* 15,000.0 70,704 1,300.0 19,229 10,300.0 62,452 10,943.0 41,125 900 9,374
PwC* 11,547.0 41,697 1,481.0 17,406 12,638.0 67,931 11,640.0 45, 624 1,074.0 11,578
The Americas Europe/Africa/Middle East Asia-Pacific
Rev Staff Rev Staff Rev Staff
EY* (1) 10,750.0 58,835 10,943.0 84,224 2,934 29893
KPMG* 7,880.0 42,544 11,640.0 80,594 3,900.0 32,042
Notes: (1) EY regional split does not include US$1,202m fee income and 6,856 staff from EY Japan. Source: International Accounting Bulletin
■■ Europe ■■ Africa/Middle East ■■ Asia-Pacific
Name Rev Staff Name Rev Staff Name Rev Staff
Mid-tier networks Mid-tier networks Mid-tier networks
5 BDO 2,475.0 19,742 5 Grant Thornton International 135.0 2,762 5 BDO 1,099.2 13,934
6 Grant Thornton International 1,778.0 12,936 6 BDO 124.4 2,498 6 Crowe Horwath International 765.8 10,849
7 Nexia International 1,162.4 8,303 7 PKF International 95.0 2,872 7 Baker Tilly International 658.4 7,415
8 Baker Tilly International 1,131.1 8,195 8 Baker Tilly International 88.8 1,569 8 RSM 574.9 10,000
9 Mazars 1,003.5 7,623 9 Mazars 87.5 2,196 9 Grant Thornton International 567.0 8,339
10 Moore Stephens International 979.9 8,140 10 RSM International 59.4 1,404 10 Moore Stephens International 500.7 9,266
11 HLB International 829.3 6,431 11 Crowe Horwath International 52.7 1,075 11 Kreston International 378.2 6,711
12 Crowe Horwath International 772.5 7,034 12 Moore Stephens International 48.8 1,314 12 PKF International 310.0 2,987
13 Kreston International 670.5 6,622 13 Kreston International 46.2 1,202 13 HLB International 291.9 4,933
14 RSM 579.2 5,059 14 Nexia International* 43.6 1,051 14 Nexia International 250.5 4,609
15 PKF International 550.0 5,212 15 HLB International* 34.8 977 15 Reanda International 112.9 1,700
Source: International Accounting Bulletin Source: International Accounting Bulletin Notes: (e) IAB estimation, Source: International Accounting Bulletin
■■ Europe ■■ Africa/Middle East ■■ Asia-Pacific
Name Rev Staff Name Rev Staff Name Rev Staff
Associations Associations Associations
1 Praxity 1,314.5 10,756 1 Praxity 122.4 2,598 1 Praxity 349.3 7,205
GGI Geneva Group 2 Morison International 72.5 1,371 2 LEA Global/Leading Edge Alliance 281.6 5,425
2 1,115.4 -
International (e)
LEA Global/Leading Edge GGI Geneva Group International
3 49.2 1,184 3 243.4
3 PrimeGlobal 882.3 8,429 Alliance (e)
4 AGN International 724.9 3,459 4 PrimeGlobal 28.9 940 4 AGN International 193.1 3,009
5 IAPA 639.2 3,240 5 AGN International 22.9 653 5 DFK International 135.3 2,916
LEA Global/Leading Edge 6 MSI Global Alliance 22.6 573 6 Morison International 132.4 2,516
6 625.3 4,448
Alliance
7 MGI 14.1 526 7 PrimeGlobal 125.5 3,520
7 Morison International 421.0 3,582
8 DFK International 11.9 438 8 KS International 75.5 1,672
8 DFK International 380.6 3,252
9 Integra International 11.6 332 9 MGI 69.9 1,358
9 MSI Global Alliance 314.2 3,496
10 IAPA 10.3 314 10 CPA Associates International 68.0 1,458
10 MGI 294.4 2,999
11 CPA Associates International 10.0 327 11 MSI Global Alliance 66.4 1,496
11 CPA Associates International 249.0 2,519
12 EuraAudit International 225.2 2,511 12 KS International 10.0 212 12 Integra International 53.0 866
13 ANTEA 185.2 1,744 13 INPACT 9.9 385 13 INPACT 48.9 1,618
14 KS International 157.5 1,360 14 Parker Randall International 7.4 201 14 IAPA 48.9 1,024
15 INPACT 122.6 1,037 15 GMN International 6.7 235 15 JHI Association 42.0 690
Notes: (e) IAB estimation, Source: International Accounting Bulletin Source: International Accounting Bulletin Notes: (e) IAB estimation, Source: International Accounting Bulletin
www.InternationalAccountingBulletin.com January 2014 y 13Survey World Survey 2014 International Accounting Bulletin
Audit fee pressure raises concerns over
audit quality globally
First IAB audit fee pressure survey shows firms in battle to sustain audit quality against reduced or stagnant fees
In January the International Accounting Bulletin conducted its first and 23% said it has been flat over the same time period. Almost 50%
anonymous audit fee pressure survey and with over 250 responses a of all respondents (48%) said they are worried fee pressure has led to
picture of intense struggle to maintain audit quality in light of low fees a decrease of audit quality at some firms in the market and 36% of
has emerged from around the world. Some 64% of respondents have respondents admitted that fee pressure presents an ongoing challenge
seen a steady increase in audit fee pressure over the past three years to maintain audit quality in the face of fee pressure at their own firm.
The IAB also asked the survey participant to leave their comment about fee pressure and we have selected the following:
“This is an issue that exists because of practitioners.
“CPA firms need to stop undercutting each other and
For whatever reason, there are practitioners willing
racing to the basement on fees. Often we are our
to bid ridiculous fees in order to get the work. We
own worst enemies as a profession.”
have become a desperate profession.”
“There will always be fee pressure in a competitive business environment, which we need to embrace. We
need to continue articulating the real value of audit to the business community, including business
leaders, boards of directors, management and the like. Audit only becomes a commodity if the auditing
profession allows it to be treated that way. The profession needs to take a leadership role in promoting
itself as the “guardian of assurance to the business community.”
“Action is required from oversight bodies to cope with
the possible negative effect of fee pressure. Minimum “This is heavily driven by supply and demand. If
audit fees need to be imposed (depending on the size growth accelerates, fee pressures will decrease.”
and nature of client operations).”
“Audit firms are the largest contributors to fee
■■ What were the most common reasons behind fee pressure?
pressure as they cut prices to get the work.”
The most common response under ‘Other’ was the Big Four starting to
bid for SME audit clients and offering low prices for Big Four service
■■ How did you deal with fee pressure?
Improving efficiency by
Client pressures investing in software
Price undercutting Making redundancies and
by competitors reorganising audit teams
Outsourcing some of
A tactic to retain the audit process
an audit tenure
More selective tendering
Audit has become
too commoditised Developing sector
expertise and niches
Clients struggling to see Offering additional services
the value of an audit in the cost of an audit
Other Other
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0 10 20 30 40 50 60 70 80
%
Source: IAB Source: IAB
14 y January 2014 www.InternationalAccountingBulletin.comYou can also read
