Big Four register net audit client losses in 2020
The Big Four accounting and consulting firms (Deloitte, PwC, EY, and KPMG) as a group registered a net loss in new SEDAR (Canadian public company) audit clients in 2020, according to a report in Canadian Accountant. The report was based on analysis from Audit Analytics, a US-based independent research firm.
The Big Four had a collective loss of -2 audit clients, driven by Deloitte Canada’s net loss of five clients. EY Canada gained two audit clients, PwC Canada gained one, and KPMG Canada broke even.
PwC was the leader in net new client audit fees in 2020, breaching $3 million. Most of its $7.86 million in total new audit fees was generated by a couple of large clients: BlackBerry ($3.4 million) – which it snagged from EY – and First Quantum Minerals ($2.2 million).
Nearly all (98%) of Canadian reporting issuers by market capitalization are audited by the Big Four or their international affiliates. When a public company changes auditors, it is almost invariably to switch to another member of the Big Four.
KPMG ranked second for net new audit fees, with $1.7 million. Almost half of its $4.8 million in new audit fees came from Turquoise Hill Resources, a subsidiary of mining giant Rio Tinto.
EY Canada, despite gaining $3.9 million in new audit fees, registered a net loss in new audit fees in 2020 in part due to the departure of BlackBerry. Deloitte also posted a net loss in new audit fees, driven by the departure of multinational gold miner Endeavour Mining, which switched to BDO UK.
Another mid-market focused firm – MNP – ranked fourth for audit fees gained, at $2.5 million. This was driven by winning the Cansortium Inc. account, which was worth $1.25 million. Davidson & Company, a smaller Vancouver accountancy, came in fifth with $2.3 million in new client audit fees.
Though Deloitte registered a loss in net new audit clients and fees, the company has scored lucrative government consulting contracts in the wake of the pandemic. Just one of those contracts – a $16-million project on a federal vaccination tracking system – was worth nearly as much as the combined new audit fees of the Big Four ($17 million).
Deloitte, like its peers, has seen its consulting – and especially its digital consulting services – account for an increasingly large slice of its revenue pie. The global network saw its consulting fees rise 7.1% to US$19.8 billion in FY2020, while audit & assurance rose just 2.2% to US$9.9 billion.
Deloitte Canada sold off many of its smaller, regional accounting practices to MNP earlier this year, pledging to invest the proceeds into digital consulting capabilities. The firm subsequently bought digital consultancy TWG and AI and data firm Groundswell Group.
