Big Four Accounting Firms Lose Public Company Audit Clients
For the first time in at least a decade, in 2003 each of the accounting profession's biggest firms lost more public company audit clients than they acquired, according to an analysis by Auditor-Trak.
PricewaterhouseCoopers suffered the biggest decline with a net loss of 91 audit clients. This shrinkage in PWC's client base reduced the firm's client revenue under audit by $46.4 billion and cut its client assets under audit by $543 billion. Auditor-Trak considers revenue for most public company audit clients but assets for certain financial services and other investment-oriented companies.
Among the Big Four firms, KPMG recorded the smallest decline in its audit client base with a net loss of 51 companies (and enjoyed a net gain of $59.7 billion in combined client revenue audited but a net loss of $17.3 billion in assets).
Ernst & Young finished 2003 with 76 fewer audit clients (a decline of $24.5 billion in client revenue audited but an increase of $150.9 billion in assets) and Deloitte & Touche had a net loss of 65 clients (audited client revenue down $45.6 billion, assets up $394.9 billion).
"After the rapid growth of the Big Four's audit client lists in the wake of the 2002 collapse of Andersen, we expected 2003 would be a year of rationalization of their client bases -- and that has clearly taken place," says Richard Ossoff, publisher of Auditor-Trak. "Also, we expected to see increased client selectivity on the part of the firms in light of the new Sarbanes-Oxley environment. However, these circumstances alone do not seem to fully explain the extent of these client losses."
Smaller national firms -- Grant Thornton, BDO Seidman and McGladrey & Pullen -- collectively acquired 21% of the clients lost by their Big Four competitors. Significantly, 34% of the public companies that formerly used a Big Four auditor opted for a regional or local firm as a replacement.
Prominent new audit clients acquired by KPMG last year include Sprint Corp. and AutoNation Inc. Deloitte & Touche added Royal Bank of Canada and its U.S. unit, RBC Centura Banks. Ernst & Young brought U.S. Bancorp and Clorox Co. into its client portfolio, while PricewaterhouseCoopers was hired by Calpine Corp. and Carnival PLC.
On the negative side of the ledger, KPMG lost Neuberger Berman Inc. and Spiegel Inc. Deloitte & Touche lost Denny's Corp. and CITGO Petroleum Corp., Ernst & Young departed from the American Skandia Life Assurance Corp. and Steak n Shake Co. engagements, and PricewaterhouseCoopers lost Kmart and Pharmacia Corp.
Auditor-Trak's exclusive ratings and records of more than 12,000 auditor changes are published by Strafford Publications Inc., a publisher of specialized professional briefings and information services for attorneys and senior corporate executives.