Big Four respond to regulatory shifts across the EU
Nov 15, 22
A new report published today (Tuesday 15 November) from Ideagen’s Audit Analytics research unit has shown the scale of the impact of EU regulation on the Big Four audit firms across Europe.
Since the introduction of legislation to limit ‘non-audit’ services, the Big Four audit firms – Deloitte, Ernst & Young, KPMG and Price Waterhouse Coopers - have seen the percentage of their non-audit fees decline by 8%. In comparison, the rest of the market has declined by 2.5%
Ideagen report author, Sarah Keohane, said: “In 2014, the European Parliament passed two significant pieces of legislation designed to protect the integrity of statutory audits and strengthen auditor independence.
“One component of the regulation prohibits the provision of certain non-audit services by statutory auditors and caps auditors’ remuneration for many other services.
“This appears to have affected the Big 4 firms differently than the rest of the audit market. After 2016, the Big 4 firms’ percentage of non-audit fees began to decline rapidly.”
‘Non-audit’ services are any activity unrelated to the audit itself, such as legal fees, IPO and prospectus activity.
Other interesting findings of the report show the number of companies listed on EU stock markets grew 0.5% between 2020 and 2021, whereas total audit fees rose 6.1%, suggesting that the rise in total fees cannot be purely put down to an increase in listed companies.
Total Audit fees across Europe was €7.8bn ($8.1bn) which is less than half of those listed in the US ($18bn) but the number of SEC listed companies is higher (around 7,000). Average audit fees per million of company revenue are higher than pre-covid levels at €384 per million of revenue.
The report is one of many undertaken by Ideagen’s Audit Analytics team who provide independent and impartial accounting and auditing research to academics, the financial industry, regulators and other key stakeholders.
Their data has been cited in thousands of academic articles, regulatory proposals, government submissions and policy reviews.
Their next major report on SEC listed ‘Going Concerns’ is due to be published on 29 November with some interesting results expected on the health of listed businesses closing in 2021 with COVID-19 impacts still lingering but before the global energy, supply chain and inflation challenges of 2022.
For the rull report visit Audit Analytics blog pages.