For the third straight year, one Big 4 firm has held steady or grown its number of public company audit engagements while the other three have lost ground.
A tally of data from the first, second, third, and fourth quarters of 2017 from Audit Analytics shows Deloitte grew its public company audit practice by a net 20 clients in 2017, picking up 37 new engagements but losing 17, primarily to other Big 4 firms. In 2016, Deloitte gained 28 clients and lost 27 for a net pick-up of one engagement. In 2015, the firm gained 31 clients and lost 26 for a net gain of 5 audits.
The remaining Big 4 firms have all suffered net engagement declines in the past three years, according to Audit Analytics. In 2017, KPMG gained 18 engagements but lost 27 for a net drop of nine audits. In the same year, EY lost a net seven audits, winning 24 but losing 31. PwC dropped a net 23 engagements, picking up 9 but losing 32.
In the year before, KPMG, EY, and PwC, all lost a net 24 engagements, losing more than twice the number of engagements they added at all three firms. Similarly in 2015, while Deloitte ended the year ahead, KPMG lost a net 22 audits, EY a net 27, and PwC a net 24.
None of the Big 4 firms agreed to comment on the data.
In published audit inspection reports, Deloitte and PwC have delivered the lowest rates of audit deficiency in recent years. Reports on 2016 inspections from the Public Company Accounting Oversight Board show inspectors found problems in 24 percent of Deloitte’s audit files and 20 percent of PwC’s. At EY, the deficiency rate was 27 percent, while KPMG’s 2016 report is not yet published.
In 2015, Deloitte’s deficiency rate was 24 percent and PwC’s the lowest at 22 percent. EY delivered a 29-percent deficiency rate, and KPMG’s was the highest at 38 percent.
A review of Audit Analytics’ quarterly gain and loss data also shows changes in audit firm were unusually low in number at the end of 2017. The end of the year, as companies are about to close the books, is not typically a time for companies to change audit firms, perhaps especially at the end of 2017 as companies were about to adopt massive new rules on revenue recognition.
In the final quarter of 2016, for example, Big 4 firms collectively picked up nine new engagements and lost 20. At the end of 2017, Big 4 firms gained 10 engagements and lost 10.