New European regulations are set to take shape in 2016 and competitive tensions are mounting between the Big Four’s audit and consulting divisions as companies fight to retain the best public accounting firms, said a recent Financial Times article.
Due to the new European rules, which mandate companies to change their auditors every 20 years, some of the top FTSE 100 companies are switching auditors amid the new regulatory landscape.
KPMG was most recently appointed auditor to Barclays, ending the British bank’s 120-year relationship with PwC. The audit firm rotation continued at Tesco, which switched from PwC to Deloitte, while HSBC switched KPMG to PwC, and EY took over the Royal Bank of Scotland from Deloitte.
Moreover, the increasing use of technology led to a decline in audit revenues. Industry analysts believe parts of the audit function that are being automated can have a serious impact on consulting revenue, which turns to the question—whether it makes sense that audit should be in the same category as consulting firms.
At PwC U.K., for example, consulting was a rapidly growing business in 2015. Consulting revenue saw a 16 percent spike, which catapulted overall revenue to surpass £3 billion for the first time within the last fiscal year. At Deloitte U.K., consulting work helped the audit firm reach up to ?£2.7 billion in revenue.
Cyber security remained a major focus at the Big Four during 2015 as they hired and bought smaller firms to help provide customers with more options and services.