CPA Firms Are Backing Away From Offering Auditing Services

A report this week by The Washington Post reveals that many accounting firms are reducing the number of audits performed for public companies, and, in some cases, firms are giving up providing public company audit services altogether. The exodus from providing these services is a direct result of the recent auditor independence rules and the creation of the new Public Company Accounting Oversight Board.

The PCAOB rules state that any public accounting firm that wishes to perform audits of public companies must be registered with the Board by October 22, 2003. However, there is a 45-day review period in place, which effectively means that any firm must file its registration by the first week of September - less than 10 days from now. Of the current 850+ public accounting firms that performed audits of publicly held companies last year, only 88 have registered with the PCAOB so far as of August 27. (A list of firms that have applied for registration is now available on the PCAOB Web site. This link is to the list dated August 27, 2003.)

Citrin Cooperman & Co. of New York, the 49th largest U.S. accounting firm, Grassi & Co. of New York, the 74th largest firm, and many other firms have announced they will cease audit work for public companies, or at least significantly cut back on such work.

The General Accounting Office issued a report earlier this month citing concerns about the lack of competition among accounting firms for the public company audits. The report referred to the audit services market as a "tight oligopoly" and indicated that the Big Four accounting firms now audit 97 percent of public companies with annual revenues exceeding $250 million. This percent is expected to increase in future years.

In addition to blaming the changes in audit rules and oversight for a decrease in the willingness of small firms to provide audit services to publicly owned companies, the GAO report referred to the difficulty small accounting firms face in auditing large, publicly held companies, noting that the small accounting firms "generally lack the staff, technical expertise, and global reach" necessary to audit such companies.

Besides the concern for the lack of competitive options in selecting an audit firm, the GAO noted that, as more of the public company audit work is isolated among the Big Four firms, smaller publicly-held companies will find it more difficult to find an auditor willing to take their work.

Related Article: New Report on Top Public Accounting Firms Details Consolidation, Barriers

You may like these other stories...

You have a big presentation forthcoming that might enable you to land a huge client for your firm. Are you sufficiently relaxed to be at your best? Let me offer a story and some observations that drive home a crucial point....
Accountants who specialize in forensic and valuation services point to electronic data analysis, or big data, as the most pressing issue they’ll face in the coming months, according to results of a new survey released...
Renaissance avoided more than $6 billion tax, report saysThe Senate Permanent Subcommittee on Investigations said on Monday that a Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6...

Upcoming CPE Webinars

Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.
Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.