The Big Four accountancy firms–Deloitte, KPMG, PricewaterhouseCoopers, and EY U.K.–have increased their share of the U.K. audit market over the last year, even amid a series of accounting scandals, according to new report from the U.K.’s Financial Reporting Council. The research showed that the Big 4 now audit all the FTSE 100 companies.

The latest edition of the FRC’s “Key Facts and Trends in the Accountancy Profession” published on Oct. 28, 2019, reveals that the Big Four increased their combined “total fee income” by 4.7 percent to £10.95 billion ($14.08 billion) and “audit fee income” by 1.7 percent to £2.1 billion ($2.7 billion), according to the FRC. By contrast, total fee income at non-Big Four public-interest entity (PIE) audit firms fell by 8.1 percent and “audit fee income” fell by 6.3 percent (compared to a three percent increase in 2016/17).

The average audit fee income in 2018 for all firms with PIE clients per responsible individual was £1.46 million ($1.88 million), an increase of £0.16 million ($0.21 million), or 12.3 percent, from 2017.

The number of audit firms registered to carry out statutory audit work in the United Kingdom and the Republic of Ireland (ROI) declined 4.7 percent in 2017/18, down from 5,660 to 5,394 audit firms. This is due, in part, to a decline in both the number of sole practitioner audit firms (down from 2,733 to 2,558) and firms with two to six principals (down from 2,618 to 2,534), the FRC said.

Despite this decline, membership of the accountancy bodies continues to grow. The seven bodies overseen by the FRC have over 365,000 members in the United Kingdom and the ROI and almost 550,000 members worldwide. The average annual growth in the United Kingdom and the ROI between 2014 to 2018 was 2.2 percent and 3.1 percent worldwide.

Monitoring trends

The FRC’s Audit Quality Review team (AQR) monitors the quality of retained audits and the policies and procedures that underpin audit quality at U.K. audit firms that perform the audits of these entities. The remainder of audit monitoring is conducted by Recognized Supervisory Bodies (RSBs), of which there are four: Association of Chartered Certified Accountants (ACCA); the Institute of Chartered Accountants in England and Wales (ICAEW); Charted Accountants Ireland (CAI); and the Institute of Chartered Accountants of Scotland (ICAS).

Among the monitoring visits to registered audit firms by the RSBs during the years ended Dec. 31, 2016, to Dec. 31, 2018, most of these (714 in total) were cyclical visits. The ICAEW conducted the most cyclical visits (350), with the ACCA conducting the second highest number (281). The CAI conducted 70 visits, and the ICAS conducted 13 visits.

The second highest number of monitoring visits were for audit firms that posed a heightened risk. In this category, the ICAEW conducted 215 of those visits; the ACCA conducted 108; the ICAS conducted 31; and the CAI conducted nine.

Auditor complaints

The FRC also analyzed the number of audit-related complaints received by the RSBs from 2016 to 2018 to show (i) number of new complaints, (ii) number of cases passed to the FRC Enforcement Division (iii) number of cases referred to the committee, (iv) number of cases closed in the year, and (v) average time taken to close a case.

In 2018, there were 155 new complaints brought, with the ICAEW receiving the bulk of them (131). None of these 155 complaints were referred to the FRC. In 2018, 101 cases were closed, including 76 by the ICAEW; 14 by the ACCA; six by ICAS; and five by the CAI.

Diversity gaps

The diversity of senior management in the audit and accountancy profession is an area that needs to improve. According to the FRC, one in three U.K. audit and accountancy firms do not collect diversity data for their workforce. This is ironic, because accountancy firms advise large companies on their own diversity and inclusion strategies, the FRC noted.

In fact, a high percentage of accountancy bodies collect data on age, race, and gender of their members and students, the FRC said. Four of the bodies collect disability data of their students; only two of the bodies, however, collect this data of its members.

The FRC’s statistics revealed that while women make up 46 percent of manager-level roles at audit and accountancy firms, just 17 percent of women rise to partner level roles. A similar trend can be seen at smaller firms with less than 200 employees, where 52 percent of manager level roles are held by women, but just 11 percent of women hold partner level roles.

The good news is that there has been an increase in the number of bodies that collect diversity data of their workforce around age, gender, race/ ethnicity, disability, religion, and/or sexual orientation. All the bodies now have diversity policies/ statements in place.

“The business case for improved diversity has been made, and now it’s time for the audit and accountancy profession to take further positive action,” said FRC Chief Executive Sir Jon Thompson.While it is encouraging to see more firms implementing diversity and inclusion strategies and more women, ethnic minority groups, and disabled people being appointed to middle management roles, more needs to be done to ensure the firms are not limiting access to the most senior roles.”