The audit market for large public companies has become more concentrated among the Big Four firms, but not enough to require corrective action, according to a government report.

A survey by the Government Accountability Office found that 82 percent of large public companies saw their choice of auditor as limited to three or fewer firms. About 60 percent view competition in the market as insufficient. Most small public companies, however, said they were satisfied with the auditor choices available.

According to the GAO's analysis, the largest accounting firms audit 98 percent of the more than 1,500 largest public companies, those with annual revenues of more than $1 billion. In contrast, midsized and smaller firms audit almost 80 percent of the more than 3,600 smallest public companies, those with annual revenues of less than $100 million.

Audit fees have grown significantly in recent years, but companies attribute that to the increased compliance requirements and higher costs of personnel. Company officials also acknowledged that audit quality has increased in recent years. However, the loss of another of the Big Four firms would reduce the auditor choice for companies even further and likely raise fees even more.

Smaller accounting firms face challenges in competing with the big firms for public companies, but large public companies surveyed by the GAO said the smaller firms lack the capacity and technical expertise they require. Smaller audit firms also face challenges in finding additional qualified staff and increasing their name recognition. As a result, many are joining networks with other firms.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access