Top 1000 Audit Watch is the first survey of its kind, analysing who audits Ireland’s largest companies and how much they charge for doing so.
The report draws on data collated by The Irish Times business team as part of its Top 1000 Companies project (www.top1000.ie) and is extracted from company filings to the Companies Registration Office, as well as annual reports. It is correct as of October 24th. Where possible, audit fees, which have been taken on a group basis, have been broken down into audit-only fees, and non-audit fees, so references to "value of audits" relates to audit-only fees. However, given that some companies do not publish such a breakdown, it has not always been possible to analyse fees. In this regard, there may be an overstatement of total audit fees when companies have quoted only "auditors' remuneration", so additional tax/assurance fees may be included in this figure.
There may also be some overstatement in terms of total fees earned by the big four professional services companies, due to the fact that audit fees have been collated on a group and network basis. Hence, not all fees earned will be booked by the Irish arm of the accountancy network. For example, in 2011 Grafton Group spent €627,000 on audit fees. But according to its accounts, €526,000 of this went to KPMG Ireland, with the remainder going to "other network firm – KPMG".
There may also be an understatement of fees earned by accountancy firms, because it has not been possible to ascertain who audits a small number of companies, or the fees that were paid, for some entrants in the survey of Top 1000 companies.
This may be because the company is unlimited, and does not file accounts, or files accounts on a section 17/external company basis, and therefore does not disclose such information. The tables published on this page give a clear indication of the dominance of the big four. As auditors of almost 70 per cent of the companies featured in the Top 1000 survey, the big four have a firm grip on the industry, with mid-tier firms appearing to struggle to make a significant impression.
Even more striking is their hold on the more valuable audits, with more than 90 per cent of audit fees generated by Top 1000 companies paid to big-four firms. Among the big-four companies there is a further distinction, with PwC and KPMG earning almost 60 per cent of total audit fees among the Top 1000.
Unsurprisingly, Top 1000 audits make a significant contribution to big-four firms. When audit and non-audit fees are combined, KPMG earned about 24 per cent of its total fee income from Top 1000 companies in 2011. This figure is an estimate given that not all companies included in the survey will have yet filed accounts for 2011, as well as for reasons outlined above.
Similarly, PwC depended on Top 1000 companies for almost 20 per cent of its revenues last year, with Ernst & Young earning almost 26 per cent from its Top 1000 clients. When it comes to determining how expensive or otherwise an audit is, we have used a ratio of audit fee to a Top 1000 company’s turnover. So, for example, on this basis, Trinity Biotech is deemed as being expensive, given that its audit fee is comparatively high relative to its turnover. Similarly, Google’s fee is at the lower end of the scale despite it being one of Ireland’s largest companies when ranked by turnover.
But it should be noted that this metric does not take into account other factors which can determine the cost of an audit, such as sector, technological advancement of systems being used and the complexity of the group structure.