Professional Services Monitor: Today

In April, we took a preliminary look at FY2009 audit fees, based on the the proxy statements processed at the time.  We have updated this analysis with an additional 1,500 filers, bringing the total to 3,636 proxies tracked between January 1 and June 15, 2010.

The preliminary analysis showed PricewaterhouseCoopers with a small increase in total fees.  Now, PwC has a change of -0.8%, with KPMG next among at the Big Four at -2.8%.  Among the top ten firms by total fees, only ParenteBeard had positive growth at 6.1%.

June 2010 Fees Summary

The table below is a summary of filings where the FY2009 auditor is different than the FY2008 firm.  Moss Adams billed an average 31% more in FY2009 than what companies paid to a different firm in FY2008.  Among the Big Four, KPMG billed 24% more  that its FY2008 predecessor.

In April, we noted, “AIG’s $193 million paid to PricewaterhouseCoopers is the largest total we have tracked, eclipsing the $156 million General Motors paid to Deloitte for FY2002.”  After fully reviewed through our quality control process, AIG’s total fees are actually even greater, $205.2 million.

Between January 1 and April 15, 2010, we have processed 2,322 DEF-14A proxy statements, the primary form on which US public companies disclose fees paid to their auditors.  While this is by no means a complete set of data on FY2009, it does represent about 40% of what should be eventually filed.  All analysis below is based upon that set of 2,322 filers.  We will update again in two months when most of the rest of FY2009 should be filed.

Emblematic of the overall economic climate, of the 10 firms with largest aggregate fees only PricewaterhouseCoopers experienced positive growth (1.9%) between FY2009 and FY2008.  Next closest was Grant Thornton at -2.1%.  Again, this is from among the 2,322 filers noted above.

The 25 largest filers by total fees between 1/1/2010 and 4/15/2010 had an average growth of about 4%.  AIG’s $193 million paid to PricewaterhouseCoopers is the largest total we have tracked, eclipsing the $156 million General Motors paid to Deloitte for FY2002.  AIG’s proxy included the explanatory sentence, “The 2009 increase in audit and audit-related fees was primarily related to nonrecurring divestiture and restructuring activities related to AIA, ALICO and Nan Shan and other separate reporting requirements related to the Company’s restructuring activities.”

The SEC requires companies to disclose fees paid to their auditors in four categories–audit, audit-related, tax and other.  Audit represented 79.3% of the total in this segment, and the overall distribution is essentially unchanged between FY2009 and FY2008.

In another look at audit marketshare, below are the total FY2008 fees, average FY2008 fees per client, and number of clients in three cities—Chicago, Denver and Seattle—based on the city from which the firm is serving a client. That is, the data is grouped on the office of the firm signing off on the client’s financials. This is often the same city as the client’s headquarters, but not always. The data is taken from Ames Research Group’s audit fees database, sourced primarily from DEF-14A proxy statements.

More lists are available on our Auditor Marketshare page.

Fees are listed in $US millions.

Chicago

Seattle

Denver

This afternoon, we have posted a new list to our Audit Market Share list section, a list of the Department of Defense’s largest contract recipients for FY2008.  We have followed this list for 15 years, and this is the first time we can recall that any of the Big 6/5/4 have appeared in the top 100.  Furthermore, BearingPoint received nearly $750 million in defense contracts, some of which will presumably go to Deloitte and PwC in Fy2009, all other things remaining equal.

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Our 2009 Big Four Annual Report is now available for immediate purchase and download. More information at www.amesrgi.com/products_annualreport.asp

We wrap up the March to April proxy statement busy season with three more lists of audit fees, as a follow-up to our earlier post. We again look at largest increases and decreases from FY2007 to FY2008, and we’ve added a third list of the 10 largest total audit fees.

These 30 companies were taken from about 2400 proxies filed during March and April, 2009. The average increase in this group was about 10.0%.

PricewaterhouseCoopers clients had an average increase of 8.9%. The three of the four largest audit fees-paid in FY2008 belong to PwC clients: JP Morgan Chase, Goldman Sachs Group and Bank of America. With the large acquisitions made by each of these three companies in the second half of 2008, one might expect that audit fees increases ought to be even larger in FY2009.  Net, audit fees increased for this group of PwC clients by about $6.5 million.

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Two more lists have been added to our Auditor Market Share Lists.  These lists provide the 10 companies with the largest increases and decreases in total audit fees, among proxy filers in March 2009.

These 20 companies were taken from more than 1000 proxies filed during March.  The average increase in this group was about 6.1%.

KPMG clients, for one, have an average increase of 10.9%.  Boise Inc., a KPMG client, had the largest increase in fees at more than 1500% between FY2007 and FY2008, although McGladrey was Boise’s auditor for FY07.  Furthermore, as Hoovers.com notes, Boise Inc. “was formed in 2008 when Aldabra 2 Acquisition Corp. purchased the paper and packaging assets of Boise Cascade.”  Synovus Financial was the KPMG client with the largest decrease, -60%.

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OpenID, a login framework “eliminates the need for multiple usernames across different websites,” is now supported on amesrgi.com for commenters.

OpenID allows users to login with a GMail, Yahoo, WordPress.com, or Blogger account, among others.

We’ve posted a new, somewhat superfluous, list to our Auditor Market Share Lists.  We look at 30 companies with long-distance audit relationships.  That is, the auditor’s office noted on the audit opinion is some distance from the company’s registered headquarters address.

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We’ve posted two new lists to our Auditor Market Share Lists.  First, we look at the 10 largest private companies from Forbes’ Top Private Companies list.  Second, we look at the change in PricewaterhouseCooper’s Japanese market share, following the turmoil with its Japanese affiliate firms, through the firm’s share in 2008 vs. 2009 of the Financial Times Japanese 500 list.

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