Auditing

CFO Discontent with Big Four Grows

A recent survey of large accounting clients shows mounting dissatisfaction -- even as fees edge upward.
Kathy HoffelderJune 26, 2013

Despite mounting discontent with the Big Four accounting firms, audit fees have edged up, according to a survey of 259 global CFOs, controllers and chief accounting officers of mostly public firms polled by BTI Consulting Group at the end of last year through March of 2013.  

Only a tad more than half (51.9 percent) of the respondents, who represent firms with average revenues of $2.3 billion, would recommend their current auditors to peers. That’s down from 60.2 percent during the previous survey in 2011. The audit firms associated with the other 48.1 percent of the respondents should thus feel “vulnerable,” according to the report.

Indeed, the less-than-stellar results could lead clients to be more inclined to switch audit firms. When asked specifically whether respondents have recently replaced or are planning to replace their primary audit firm, over 25 percent fell into this category, which is up dramatically from two years ago.

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At the same time, respondents on average spent $2.3 million on audit fees in 2012, a slight increase from $2.2 million during 2011. Similarly, the largest companies, those with over $5 billion in revenue, spent an average of $6.5 million on annual audit fees, up slightly from $6.2 million in 2011. 

The dichotomy between client satisfaction and audit fees indicates that as clients in the survey raised their expectations for audit-firm services, satisfaction with the Big Four dropped.  

Respondents’ main wish lists for better relationships with their auditors included such efforts to“boost understanding of the client’s business,” “increase client focus and communication,” “manage continuity better,” “improve explanation of materiality,” and “decrease just-in-time management.”

Of the Big Four, PricewaterhouseCoopers garnered the best grades from clients in terms of those criteria. PwC ranked highest among clients in the survey in terms of client satisfaction for the second year in a row. KPMG placed second, and Ernst & Young and Deloitte took up the three and four spots, respectively.   

“PwC is strongest in understanding the client’s business—the single biggest differentiator,” says Michael B. Rynowecer, president of BTI Consulting Group. KPMG, he adds, saw its performance soar in specific areas like “commitment to help” and “dealing with unexpected changes.”

Ernst & Young, meanwhile, topped the quartet in terms of clients’ perception of audit skills and meeting the scope and budget of its clients.  

A notable finding in the BTI survey was that auditors’ redundant inquiries; their increased accounting staff turnover, which forces clients to repeat their explanations of key business issues; and their over-analysis of non-critical issues added to the perception that the Big Four’s value is declining.