Professional Services Monitor: Today

 

June 17, 2010

FY2009 Audit Fees Updated

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%.

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November 18, 2009

Auditor Market Share Lists: A Tale of Three Cities

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

Firm Total Avg Clients
Deloitte $198.5 $5.7 35
Ernst & Young $128.4 $2.7 47
PricewaterhouseCoopers $101.9 $4.2 24
KPMG $90.3 $3.0 30
Grant Thornton $9.8 $0.8 12
BDO Seidman $6.7 $0.6 12
Blackman Kallick Bartelstein $1.1 $0.4 3
McGladrey & Pullen $0.4 $0.2 2
Plante & Moran $0.3 $0.3 1
Crowe Horwath $0.2 $0.2 1
Virchow Krause & Co. $0.1 $0.1 1
Wipfli $0.1 $0.1 1

Seattle

Firm Total Avg Clients
Deloitte $51.1 $3.6 14
KPMG $39.3 $2.1 19
Ernst & Young $26.8 $3.0 9
PricewaterhouseCoopers $7.8 $1.0 8
Grant Thornton $1.8 $0.5 4
Moss Adams $1.5 $0.4 4
Peterson Sullivan $0.8 $0.2 5
Schwartz Levitsky Feldman $0.3 $0.3 1
McGladrey & Pullen $0.3 $0.3 1

Denver

Firm Total Avg Clients
KPMG $55.2 $3.1 18
Ernst & Young $45.9 $2.7 17
PricewaterhouseCoopers $26.2 $2.9 9
Deloitte $13.7 $1.2 11
Ehrhardt Keefe Steiner Hottman $5.8 $0.3 17
Grant Thornton $4.2 $0.5 8
Hein & Assoc. $2.8 $0.3 11
GHP Horwath $1.2 $0.2 5
BKD $1.0 $1.0 1
Crowe Horwath $0.6 $0.6 1
Causey Demgen & Moore $0.4 $0.2 2
Eide Bailly $0.3 $0.3 1
McGladrey & Pullen $0.1 $0.1 1
Gordon Hughes & Banks $0.1 $0.1 2
Stark Winter Schenkein & Co. $0.1 $0.1 1

July 17, 2009

Auditor Market Share Lists: DoD Contractors

Filed under: ARGI,Deloitte,Firms,KPMG,PricewaterhouseCoopers — psmtoday @ 2:30 pm

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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April 8, 2009

Auditor Market Share Lists: Audit Fees Increase/Decrease

Filed under: ARGI,Firms,KPMG — psmtoday @ 12:47 pm

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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April 2, 2009

New Century Trustee Files Suit Against KPMG

Filed under: Firms,KPMG,Liability — psmtoday @ 12:12 pm

KPMG is being sued for “no less than $1 billion in compensatory and consequential damages” by the bankruptcy trustee for New Century Financial.

The trustee overseeing the bankruptcy of subprime lender New Century Financial Corp. filed suit against its auditor, KPMG LLP, claiming that “reckless and grossly negligent audits” helped accelerate the firm’s collapse two years ago.

The lawsuits filed Wednesday said that specialists at KPMG tried to point out errors in New Century’s financial statements but were silenced by the KPMG partner in charge of the audits “to protect KPMG’s business relationship with, and fees from, New Century.”

Francine McKenna, of Re: The Auditors fame, is quoted in the story, saying that if the suit is successful, “it may embolden others to look more closely at the possibility of bringing [accounting] firms to some level of culpability for the things that happened” that led to the credit crisis.

KPMG spokesman Dan Ginsburg said, “KPMG acted in accordance with professional standards in New Century, and we will vigorously defend our audit work. Any implication that the collapse of New Century was related to accounting issues ignores the reality of the global credit crisis. This was a business failure not an accounting issue.”

New Century disclosed a total of $10.4 million in fees between fiscal 2002 and 2005.


Fiscal Year Audit Fees Total Fees Fees-to-Revenue
2005 $2,319,347 $3,808,781 0.16%
2004 $1,783,100 $3,576,708 0.21%
2003 $705,900 $1,625,959 0.17%
2002 $355,000 $1,450,000 0.24%
$10,461,448

April 16, 2008

Spring Cleaning–March Auditor Changes

Filed under: Firms,KPMG,Marketshare — psmtoday @ 1:55 pm

Spring is the season when the minds of audit committees and CFOs turns to relationship matters, specifically those with their auditors.  Following the close of December fiscal years, March and April tend to have the largest numbers of auditor changes during the year.  The Spring Fling is even more pronounced for companies over $1 billion in revenue.

While holding with the overall trend in relation to the rest of the year, March 2008 actually had the fewest changes, both overall and among large-companies, during any spring since 2004.

Notable during this period was KPMG’s wins.  KPMG won nearly 40% of the engagements involving a company over a $1 billion in revenue, and at the same time did not lose any.  KPMG’s new clients include Unisys and CB Richard Ellis.  Grant Thornton also had two wins in this group.

March 20, 2008

No Matter How Big, Relationships Matter

Filed under: Ernst & Young,Firms,KPMG,Marketshare — psmtoday @ 1:32 pm

In an 8K filed Tuesday, Broadcom announced its dismissal of Ernst & Young and engagement of KPMG. This is a nice win for KPMG, but the more interesting part of the event was one sentence within the filing:

The decision to change auditors was the result of a competitive process, conducted as part of the Company’s ongoing efforts to enhance its corporate governance practices, that was launched in conjunction with the rotation of the lead E&Y audit partner off the Company’s account pursuant to Rule 2-01(c)(6) of Regulation S-X.

That partner rotation rule, part of Sarbanes-Oxley, requires that the lead and concurring partners rotate off engagements every five years. With smaller audit firms and smaller clients, this has been a big deal. Since a small firm has only so many partners to go around, this often means the loss of a client after five years for the reason alone. Among larger firms and clients, however, we have not seen this mentioned in many, if any, auditor changes.

Broadcom had used Ernst & Young since its 1998 IPO, if not longer, meaning it could have been working with the same partner for 10 years. While we have no further information than this on the situation, that mention under these circumstances seems to bring to light the importance of personal relationships, even with a Big Four firm and a billion-dollar client. Through our Quarterly Competitive Summary, we interview hundreds of CFOs every year following auditor changes. Rising fees and independence concerns have been key reasons cited by CFOs for making an auditor change over the past three or four years. But other factors having to do with the relationship, such as previous experience with a firm, have been a constant through the nine years we have done this research. Furthermore, smaller companies say over and over again that they leave, or are left by, the Big Four in order to get more personal service at Crowe Chizek or Grant Thornton.

August 22, 2007

BusinessWeek: “Consulting Pays Off for Accountants Again”

On Monday, BusinessWeek published an article on the new face of the old consulting-services businesses at the Big Four. Specifically, the article discusses Deloitte Consulting and the serendipitous collapse of the deal to spin-off the consulting in March 2003. Since then, Deloitte has continued as the only of the Big Four to have a major consulting practice named as such. E&Y sold its consulting practice to Cap Gemini; KPMG spun-off its consulting business to become BearingPoint; and PwC sold its consulting division to IBM to become part of IBM Global Services. And in the luckiest break of all, Andersen Consulting completed its prolonged and painful departure from Arthur Andersen in August 2000 to become Accenture.
Deloitte bucked the trend by keeping Deloitte Consulting under the same roof. Not only did it retain the business, as the article details, Deloitte has made the consulting business even more integrated with the audit and tax practices.

At Deloitte, partners say consultants are far more intertwined with the rest of the business than ever before, starting with their wallets. The SEC outlawed the practice of paying auditors based on non-audit work. So now Deloitte has one big pool of profit that auditors, tax experts, and consultants all share. Audit partners can still refer business to their consulting counterparts, but they only benefit in a broad sense, no longer directly. “Teaming became our mantra,” says Salzberg. James Quigley, chief executive of the global firm, Deloitte Touche Tohmatsu, says the U.S. firm’s array of services makes it “a category of one.”

But, as the article continues, the rest of the Big Four might quibble with Quigley’s assertion of Deloitte’s singular station in consulting. “And it hasn’t taken long for the other audit firms to do the math, and quickly rebuild their own consulting arms. KPMG Worldwide last year sold $5.3 billion of consulting, a 12% jump from the year before; PricewaterhouseCoopers (PwC) $3.7 billion, up 20%; and Ernst & Young $2.4 billion, a 2% increase.” As a Deloitte consulting executive told me even three years ago, “I know the rest of the firms have consulting, even if they’re aren’t calling it that anymore, because they’re bidding against me for the same consulting work.”

Link: Consulting Pays Off for Accountants Again – BusinessWeek

July 18, 2007

KPMG May Get Pulled Into New Century Financial Bankruptcy Proceedings

Filed under: Firms,KPMG,Liability — psmtoday @ 12:03 pm

CFO.Com reports (via Jack Ciesielski’s AAO Weblog) that New Century Financial creditors are seeking documents from KPMG relating to the firm’s work for New Century.

While New Century Financial Corp. seeks to retain control of its Chapter 11 process in U.S. Bankruptcy Court, its unsecured creditors want to use the court to probe the relationship of former auditor KPMG to the collapsed subprime mortgage lender.

In a filing with the court in Wilmington, Del., the official committee representing New Century’s creditors sought the ability to force KPMG to produce documents related to its work for the company, according to the Associated Press.

The unsecured creditors want to examine documents related to KPMG’s audits, reviews of the company’s interim financial statements, audits and assessments of internal controls over financial reports, and other professional services provided to New Century, AP said…

While KPMG is still ostensibly New Century’s auditor, in that the company has not yet changed to another firm, the article notes that KPMG’s last opinion was on New Century’s fiscal 2005 annual report.

May 14, 2007

ARGI Releases 2007 Big Four Annual Report

Released today, ARGI’s 2007 Big Four Annual Report is the leading, comprehensive analysis of annual Big Four market share and operating results. The report uses a special methodology to analyze firm results and covers all areas critical to major professional service organizations.

2007 Big Four Annual Report cover

For 2007, the Report assesses trends and issues such as “Public Accounting in the Public Eye,” the need for world-class talent, the Post Crisis SOX 404 environment, and prospects for Big Four growth in the next 5-10 years. The report also provides an overview of important market share metrics, such win and losses, net audit market share gain in 2006, and total professional fees billed to public companies during 2006.

In other words, the Big Four Annual report offers an independent and objective comparison of the Big Four firms in clear measures. The biggest firm by revenue, the most profitable firm for partners, the firm with the most employees, and the firm with the highest average per-client fees are all questions answered.

Ordering information, along with sample pages from the report, are available from the Annual Report’s product page. Questions on the report may be directed to sales@amesrgi.com.

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