Second-Tier Firms Picking Up Audit Clients from Big 4, Data Says

Big 4 firms lost 64 public company audit engagements last year while national firms in the second tier added 58 new clients, according to Audit Analytics, which tracks auditor changes, fees, restatements and other issues.

In fact, one of the best years for adding SEC audit clients went to Chicago-based BDO (FY13 gross revenue of $683 million), a 49-office firm ranked at No. 7 by IPA. The firm won 54 new clients compared to 14 losses, for a net increase of 40 engagements in 2014. Its net increase in audit fees was $36.2 million last year.

New York-based KMPG (FY12 gross revenues of $5.8 billion) was the only Big 4 to win more than it lost in 2014, with an additional 15 that came from other Big 4 firms. New York-based Marcum (FY12 net revenue of $275.5 million) also added 15 and Chicago-based Grant Thornton (FY12 net revenue of $1.25 billion) added 12.

On the other end of the spectrum, New York-based EY (FY12 net revenue of $8.2 billion) lost 43 and New York-based PwC (FY12 net revenue of $10.2 billion) lost 28.

“But client wins and losses don’t quite tell the whole picture,” Audit Analytics reported. “Deloitte, for example, may have lost a net of eight clients, but their net increase in audit fees was $27.6 million. In other words, the clients that they won brought in significantly more fees than those they lost (assuming the fees remain relatively constant).” New York-based Deloitte reported gross revenues of about $13 billion for FY12.

Chicago-based Crowe Horwath (FY13 net revenue of $599 million) ended the year with same number of public company engagements. The firm added fewer than a dozen but lost the same number between Big 4 and other national or regional firms, Compliance Week reported. Chicago-based McGladrey (FY13 net revenue of $1.37 billion) gained 14 clients, eight of them from Big 4 firms, but lost 18.