In brief...: Audit fees warning

May 9 2008

A report suggests concentration in the audit market leads to higher fees.

Research by the London School of Economics assessed the consequences if a large firm was to leave the marketplace and the so-called Big Four became the Big Three.

The report, commissioned by BDO Stoy Hayward, found a reduction from the Big Five to Big Four in 2002 saw average audit fees for listed companies increase by 2.4 per cent and since then fees have continued to grow.

It also discovered if the current Big Four (KPMG, Deloitte, PricewaterhouseCoopers and Ernst and Young) lost 10 per cent of their market share audit fees paid by listed and private companies could fall seven per cent.

Currently all FTSE 100 companies are audited by one of the large firms and only three per cent of FTSE 350 companies are audited by another.