Deloitte replaces PwC to become Biggest Intl Accounting Firm

Deloitte reported fee income of $32.4bn last year, just ahead of PwC with $32bn. EY came third with $25.9bn, followed by KPMG with $23.4bn, according to a survey from International Accounting Bulletin (IAB).  Deloitte’s lead is mainly
on the back of advisory work with the Big Four firm increasing its advisory fee income by $4.5bn since 2008. Advisory revenues at PwC only increased by $2.4bn in the same time period. The slender lead, however, may be short-lived with PwC takeover of American firm Booz & Co – worth expected revenues of $1bn – awaiting regulatory approval. 

The gap between third-ranked EY and fourth-placed KPMG has increased by $1bn in the past year to $2.4bn. In 2011 the fee income difference between the firms was only $170m. 

Deloitte's lead may be temporary as PwC awaits regulatory approval for its takeover of Booz & Co, which would bump up its revenues by more than $1 billion.

Market share figures will be closely watched by European regulators in coming years as they put pressure on listed companies to switch accountants more frequently, to avoid cosy relationships that could blunt skepticism.

So far the switching has occurred between the Big Four in Europe ahead of a new law, from around 2016, when accountants must be changed every 10-20 years.

"Many mid-tier leaders feel the EU reform has not gone far enough to increase competition in the audit market and believe... they are likely to only rotate among the big firms," the IAB annual survey said.

Smaller accountants are likely to pick up more advisory work because of the reforms which also limit Big Four income from non-audit services, the survey said.

The revenue gulf between the Big Four and next tier down remains huge, with income at BDO totalling $6.4 billion and Grant Thornton at $4.5 billion.

The IAB survey looked at 50 top firms which this year included three new entrants, two China-linked Shinewing and Key Will Group, a sign of how homegrown challengers are emerging from the world's second biggest economy.

Revenues in the sector grew about 3 percent overall but downward pressure on accounting fees increased, leaving firms worried about audit quality, a concern echoed by regulators.

Accountants said the pressure was due to customers struggling to see the value of auditing, undercutting by rival accountants as a tactic to retain auditing work, and the Big Four bidding for work from smaller customers, the survey said.