Auditor changes round-up: Q3 2023

Sarah Keohane Date published: Dec 04, 23

Hong Kong-based Ark Pro CPA & Co (formerly HKCM CPA & Co) was the leader in net SEC audit client gains in the third quarter of 2023. The firm gained five new clients during Q3, all of which were previously audited by fellow Hong Kong firm, Centurion ZD CPA & Co. According to Accounting Today, "In August, Centurion was sanctioned for ‘serious breaches of professional standards’ by Hong Kong’s audit regulator, the Accounting and Financial Reporting Council."

Moss Adams and Victor Mokuolu CPA followed closely, each gaining four new SEC clients during the quarter. Six companies had a net gain of three clients in Q3, however Deloitte and Grant Thornton had the most new engagements, adding nine and seven new clients, respectively.

Global and national firms

Overall, the top ten global & national audit firms gained 34 and lost 49 clients during Q3 2023. This was a slow quarter compared to Q2, with engagements decreasing by 21% and departures decreasing 36%.

The table below presents a complete view of the gains and losses of the major global and national firms. It shows the number of SEC audit clients that each auditor gained or lost. Additionally, it shows which firm the client was won from or lost to.

As mentioned above, Deloitte and Grant Thornton tied for the most net client gains among the global and national firms in Q2, each with three new clients gained overall. Deloitte had the most total new engagements, adding nine new clients during the quarter.

Marcum has continued to experience significant client losses for the third consecutive quarter in 2023. Following a net loss of eight clients in Q1 and twenty clients in Q2, Marcum saw an additional net loss of seventeen clients this quarter.  With 19 departures and only two new engagements, this is the largest net loss in clients for any firm in Q3.

Additionally, eleven of the companies that dismissed Marcum during Q3 had a mention of a reportable event within their auditor change disclosures. Ten cited internal controls issues, three cited issues related to financial restatements, and two reported questions regarding the reliability of information that had been reported by the former and/or current management of the company.

Market cap and audit fee gains

PwC gained, by far, the largest net market cap from their new clients during Q3 2023 at over $12.7 billion. BILL Holdings, Inc., a provider of financial cloud-based software for small and mid-sized businesses, contributed over $12.6 billion to PwC’s total after engaging the firm as their new auditor in September.

Deloitte led in terms of net audit fee gains for the second consecutive quarter. In Q2 their new clients brought in a net of $22.7 million and in Q3 they gained another $10.4 million, overall. Four of Deloitte’s new clients added over $3 million in audit fees to their total, the majority of which was gained from U-Haul Holding Co. The parent company of America’s leading moving and storage operator, U-Haul International, brought over $4.4 million in audit fees to Deloitte after engaging them as their new external auditor in August.

Filer status

Deloitte was the leader in large accelerated filer gains for the second consecutive quarter. The Big Four firm has been stacking up on big clients, gaining a total of eleven and a net of nine new large accelerated filer clients over the past two quarters. PwC and RSM were the only other firms to see positive net gains in the large accelerated clients in Q3, adding one client each.

Five firms tied for the most accelerated filer gains, each with one new engagement and no losses.

Ark Pro CPA and Victor Mokuolu CPA gained the most non-accelerated filer and/or smaller reporting company clients overall during Q3, adding four new companies each. Six other firms followed with a net gain of three clients each. Grant Thornton led this group in terms of new engagements adding five new non-accelerated filers and/or smaller reporting companies to their client list.