editor’s letter
International Accounting Bulletin
CONTENTS
News
Race to the bottom
02-03
■■ EU audit reform to affect UK CC
remedies implementation
■■ Grant Thornton International
turning the tables in Brazil
Features
04-24
o4-24: World Survey 2014
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 reforms.
Editorial Advisory Board
Kevin McGrath, Crowe Horwath
International CEO
Kevin Arnold, Nexia International CEO
Geoff Barnes, Baker Tilly International
president and CEO
Graeme Gordon, Praxity executive director
Stephen Jacobs, INPACT International president
Jon Lisby, Kreston International
executive director
James Mendelssohn, MSI
Global Alliance, executive chairman
Christian Mouillon, Ernst & Young global vicechair, assurance
Ed Nusbaum, Grant Thornton International CEO
Michael Reiss von Filski, Geneva Group
International CEO
Liza Robbins, Morison International CEO
Martin van Roekel, BDO International CEO
Jean Stephens, RSM International CEO
Robert Tautges, HLB International CEO
Pauline Wallace, PwC head of public policy and
regulatory affairs
and with an impressive response rate we
have seen fee pressure being a principal concern for firm leaders. As audit and accounting revenues are harder to come by, respondents speak of increasingly competitive conditions and severe price undercutting. Due
to the increased advisory capabilities of the
Big Four they might be in a better position
to undercut prices. However the four giants
are far from the only ones to blame for the
so-called race to the bottom, according to
respondents of the IAB fee pressure survey.
It seems that when behind a wall of anonymity firm leaders are much more candid about the realities of fee pressure, with
almost 36% admitting in the past 12 months
they have had to face ongoing challenges of
maintaining audit quality in the face of fee
pressure, and an additional 26% saying
there were concerns over audit quality due
to fee pressure at their firm in the past year.
With 2014 looking to be a year of continued M&A activity, improved global economic outlook and pending EU audit changes, the fight for audit clients is very much
on and before it is (again) too late, openly
speaking of decreasing fees and the role the
profession in maintaining audit quality is of
the essence.
Ana Gyorkos
[email protected]
In the past nine years the Big Four have
increased their average fee income by a staggering $51.5bn. In comparison, the next six
largest mid-tier networks including BDO,
RSM, Grant Thornton International etc. saw
an average $11.5bn increase in the same time
period. For the Big Four the increase has
mainly come from the growth and rebuilding
of advisory capabilities, with advisory revenues increasing by an average of $29.3bn
across the four firms since 2004.
While the advisory revenue pie has been
steadily increasing for the Big Four over the
past decade, the trend for audit and accounting services is somewhat different with the
average revenues earned by the Big Four
decreasing by $5bn in the past five year. In
the same time period the mid-tier increased
revenues from audit and accounting by an
average $1.9bn. In this year’s IAB World
Survey we report further advisory M&A
deals by the Big Four, such as the well publicised tie-up between PwC and global consultancy Booz & Company at the end of last
year. Such deals are dubbed key for growth
as regulatory compliance demands and fee
pressure are leading to a standstill of audit
revenues globally.
As an addition to the IAB World Survey
we have, for the first time this year, conducted an anonymous global fee press