Big Four auditors grab top firms

THE financial health-checking of almost all of Britain's top 350 companies is in the hands of only four firms of auditors, latest research has revealed.

Following the demise of Andersen and the 1990s merger frenzy between the world's major accounting firms, not one of Britain's FTSE 100 companies is audited by a firm outside of the so-called Big Four.

But a new survey encompassing the FTSE 250 as well, shows that the four firms - PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte - audit the vast majority of the stock market's second-liners, giving the quartet the audit of 97.5% of Britain's leading quoted firms.

The figures reveal that the so-called middle tier of smaller international accounting firms has made little competitive impression on the Big Four.

They have been released just as the world's fifth-largest firm, Grant Thornton, has become embroiled in the Parmalat scandal as auditor of key parts of the Italian group's trading empire.

It has long been argued that the emergence of a consolidated Big Four could lead to the majors acting as a cartel and at the least would leave top companies with little choice of auditor.

Despite this, European Commission investigators accepted arguments at the time of the merger of Price Waterhouse and Coopers & Lybrand that consolidation would pose no problem as smaller players like Grant Thornton and Stoy Hayward would grow in size and reputation to pick up market share.

That, however, has clearly not happened according to first-time research by magazine Financial Director into the audit market encompassing the whole of the FTSE 350.

The magazine's editor Andrew Sawers said: 'We've known for more than seven years that the Big Six/Five/Four have a stranglehold on the FTSE 100.

'But the surprise for us this year was to discover the extent to which the major audit firms now dominate the FTSE 250.'

The figures show that PricewaterhouseCoopers, headed by Kieran Poynter, has 40% or nearly £140m of the £350m audit-fee market, followed by KPMG at £93m.

Following its takeover of the London office of Andersen, Deloitte - with audit fees of £65m from its FTSE 350 clients - has leapfrogged Ernst & Young into third place.

The firms are also still earning fat fees from non-audit services. The survey showed the Big Four accountants were paid £454m in add-on fees from FTSE 100 audit clients.

That, however, was a fall of 28% year-on-year after the onslaught of United States legislation and corporate governance clampdowns on potential conflicts of interest where auditors offer additional consultancy advice, especially on tax avoidance.