Skip to main content

increase in big 4 fees

For those of you who are entering into your first busy season next year, or just finished busy season, take a vacation. I need one right now to recharge my batteries, can hopefully take one soon. At least we have the spring going for us.
Here's a little article of interest ...can we say oligopoly...


British Business Monitor
30 April 2008
(ADP) - Apr 30, 2008 - The four big audit firms' domination has caused an average rise of 2.4% in their fees not taking into account other factors like regulation changes, London School of Economics' study shows, the Financial Times reported.
PwC, Deloitte, KPMG and Ernst & Young audit all companies listed on the FTSE 100 index and almost all on the FTSE 350 after the collapse of Arthur Andersen in 2002.
Although the fees' rise might seem insignificant, the fact that the rise could have resulted from a market dominance reinforces the debate about the risks of just four firms auditing the accounts of all largest businesses.
The Big Four's competitor BDO Stoy Hayward, which financed the research, said that the audit market has entry barriers.
According to the study, between 1998 and 2006 the premium in the fees of the Big Four was 13% on the average and went up to 20% after 2002 when Andersen crashed. So far the rise in fees was said to result from new regulations. However, the study states that the smaller number of auditors has had an effect.
UK watchdogs have recognised the risks coming from the Big Four’s market dominance, but being so far concerned not with the audit fees but rather with a possible collapse of another big auditor.

Comments

Anonymous said…
Isn't a 2.4% rise just an inflation adjustment?

Popular posts from this blog

auditing vs consulting

I was wondering if you could break down the career opportunities in auditing and consulting (in a big 4). I know that consulting pays more in a big 4 and has more interesting work, but it seems that auditing has extremely good exit opportunities (Financial controller, CFO etc). Any thoughts on which is better in the long run?

Well there's different consulting services offered by public accounting companies - the most popular being IT consulting and risk consulting. There are also other consulting services offered, but these two hire the most. Do they pay more? Yes, but not by much. Not enough for you to say: Shoot, the $$ is a huge reason for me to move over. Is the work more interesting than audit? Yes. You're actually looking over a company's processes and telling them what to do instead of what not to do (audit). Everyone I know who's made the switch likes it waay better than audit.
In the long run though, choosing audit vs consulting really depends on what you want t…

should you choose to audit financial services?

I'm trying to decide whether to audit financial services companies or non-financial services companies. What would you say are the pros and cons of either industries? Do individuals who choose non-FS have less career mobility within the firm or if they decide not to stay with the B4 after a few years?
Really depends on what you'd like to do after (unless you really love auditing). If you want to a controller,etc. at a p/e firm or a hedge fund down the road, you'd want to go into financial services. The pay won't be too bad, especially if you get a share of the insane bonuses they dole out. If you want to audit industries with tangible products and want to get a better understanding of the operations of such businesses, then other industries are the way to go.In terms of mobility outside the firm, auditing other industries is the way to go since you have plenty of options when you exit the audit world. For example, in 2008, after Lehman collapsed, it was incredibly hard …

career progression

"What can you tell me about the different possible tracks a person would take at the Big 4 in regards to tax vs. audit? Is there a difference in career progression among the two specialties? How about career potential? Workload?"

Loaded question. In terms of career potential, they're both pretty potent. Audit leads you to controller/accounting manager/ VP - accounting positions at companies if you choose to quit. Tax can lead to tax manager positions at various companies/firms..to help them minimize taxes and exploit tax loopholes. It's a pretty important position in many companies...I'm not an expert on tax careers though, so you might want to ask somebody in a tax related position.
In terms of career progression, it's the same as audit...start off as a staff associate...move to senior..manager..snr mgr..partner.
In terms of workload, my friends in the tax department seem to work two busy seasons...in the fall and in the spring. So I think they work more than i…