The Big Four firms alone saw increases in fee income last year across all categories, compared to their smaller rivals, but for all firms audit fees remained a steady proportion of all fees according to the latest report on the sector by the Financial Reporting Council (FRC)
The FRC has issued the fourteenth edition of Key Facts and Trends in the Accountancy Profession, which brings together data on accountancy bodies’ membership and their business over the past four years.
This shows the number of registered audit firms continues to decline gradually with a fall of 304 firms (4.6%) since December 2014. It also indicates that while membership of the professional accountancy bodies in the UK is increasing, student numbers have declined in the UK and Ireland for the past two years.
In comparison to 2014, the Big Four have collectively experienced increases in growth across all categories of fee income. This is in contrast to those public interest entity (PIE) audit firms outside of the Big Four, which collectively experienced declines in the rate of growth across nearly all categories of fee income over the same period.
The collective fee income for all PIE audit firms increased in 2014-15. The aggregate increase for the Big Four was 6.7% compared with an aggregate increase of 4.7% for the other PIE audit firms.
Aggregate audit fee income for the Big Four increased by 4.6% in 2014-2015, compared with an aggregate increase of 2.7% for the other PIE audit firms. Overall, average audit fee income per responsible individual (RI) increased by 8.8% compared to 2014 across all PIE audit firms.
The FRC says the increase in the growth rate of total fee income for the Big Four audit firms can mainly be attributed to income generated through non-audit work to audit clients, the growth rate of which increased from 0.8% in 2013-14 to 5.5% in 2014-15.
From 2013 to 2015, the percentage of fee income derived from non-audit clients has remained fairly consistent for the Big Four and the other audit firms alike.
Whilst fees from non-audit work to non-audit clients continued to grow for the audit firms outside of the Big Four in 2014-15 (3.9%), this was at a much slower rate compared to 2013-14 (17.4%).
As in the previous year, the Big Four audit 98% of the FTSE 100 and 96.8% of the FTSE 250. However, more listed companies outside of the FTSE 350 were being audited by the Big Four in 2015 than in previous years
The report shows combined membership of the seven accountancy bodies continues to grow steadily with 342,000 members in the UK and Ireland (up 2.4% in four years) and 497,000 members worldwide (up 3.2% in the last four years).
ACCA records the largest worldwide membership (183,386) and number of students (388,636). In the UK, ICAEW has the most members (123,541), but fewer students (18,165) than the ACCA, which has 81,460 students and 86,828 members.
Student numbers in the UK and Ireland have fallen slightly (1.1%) with a worldwide increase of 3.1% between 2011 and 2015.
Melanie McLaren, executive director, audit at the FRC, said: ‘The FRC provides independent oversight of the UK accountancy bodies and is the UK competent authority for audit, working closely with the relevant bodies in supervision of their members to promote high quality audit. Today’s report provides evidence on the size and nature of the profession which continues to grow in the UK and internationally.’
The FRC, in its new role as the UK’s competent authority for audit, will publish in July 2016 its first ‘Developments in Audit’ report. This will set out an overview of developments in UK audit quality and confidence in audit.
