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February 8, 2023

Accounting News Roundup: Auditors of Public Companies and Big 4 Law | 06.09.16

Auditors of public companies

Audit Analytics has a breakdown of the auditors of public companies in the US and it's as you would expect:

Not surprisingly, the Global Six continued to dominate the market of Large Accelerated Filers, auditing 96.8% of the 2,005 such companies. The Global Six are also the top auditors for Accelerated Filers and Non-Accelerated Filers, with 71.9% and 66% of each of the respective markets. However, the Global Six lost some of their market share to other firms compared to 2014, when they commanded 77.4% of the market share for Accelerated Filers and 70.2% for Non-Accelerated Filers.

What's interesting is that EY has such a commanding lead over the rest of the firms. Audit Analytics data shows that EY audits 994 of the 6,935 total companies, including 29.1% of Large Accelerated Filers, 18.8% of Accelerated Filers and 18.7% of Non-Accelerated Filers. That's 6.9, 5.2 and 3.3 percentage points higher than the next firm, respectively. 

The concentration of Big 4 auditors for Large Accelerated Filers is another interesting datpoint, as well. Combined, they audit 90.8% of the LAFs; EY and PwC have 51.3% between the two of them. I wonder if that concerns anyone?

Big 4 law

Meanwhile, Down Under, Big 4 firms are still pursuing legal work and talent aggressively:

[PwC] has grown its legal team to 12 partners and more than 60 lawyers over the past 18 months. [Legal head Tony] O'Malley said the initial plan was to double that to around 25 partners and 100 lawyers, but the numbers could be revised much higher following a review.

Meanwhile Ernst & Young has grown its partner numbers by 26 per cent in the past year to 28 partners, 33 directors and 204 lawyers in its Asia Pacific legal division. KPMG has around 30 partners.

Law firms are trying to stop the flow of lawyers by "developing closer ties" with Big 4 firms, but one of the new PwC partners says it's a little too late for that:

"The law firm model is broken. This is the way forward," Mr McNair said. "A third of my work is what I win. A third is work I win going to market with integrated infrastructure offering and the other third is from referrals," he said. "I was shocked at the collaborative culture having come from the lockstep and culture of law firms."

I continue to be fascinated by progressive business tactics of Big 4 firms in Australia. It almost gives you hope for the future of the US firms. Almost

Insider trading

Here's a career limiting move from north of the border:

A former tax accountant at KPMG LLP has admitted to engaging in tipping and insider trading using confidential information about three client firms who were facing takeover bids.

The Ontario Securities Commission said Andrei Postrado, 28, admitted he earned a profit of $200,375 in 2015 by buying securities of three companies in advance of public announcements of takeover deals.

He reached a settlement with the regulator, agreeing to a seven-year ban from trading securities and a seven-year ban on working as a registrant in the financial industry. He was ordered to pay $200,375 to the OSC to “disgorge” his profits in addition to a penalty of $20,000 and costs of $8,500.

When you're in the office, sometimes you overhear things. Or, maybe you're eavesdropping. The latter is an underrated activity.

In any case, when you hear say, inside information, usually it's best to keep it to yourself and avoid acting on it. Postrado did neither of those things:

In one case, Mr. Postrado overheard a conversation between a manager and a partner in the tax department and found out that a company was about to be acquired. He opened an online discount brokerage account at BMO InvestorLine and bought shares of the company in June, 2015.

In the second case, he accessed documents in KPMG’s computer system and opened an account at Questrade Inc. in July, 2015, to buy units of the company using cash advances on three TD Visa credit cards. After overhearing a conversation about a third deal, he bought $159,000 worth of shares and made a profit of $194,000 on his trading, the OSC said.

He also passed along the info to his father, who made about $100k. Both Postrados have "extremely limited resources, no assets in his name" and Andrei lost his job.

Sigh. The moral is don't insider trade. Come on.

Previously, on Going Concern…

Leona May wrote about C(ree)PAs. And we welcomed Cristina Garza as a contributor yesterday. She wrote about small firms staying relevant.

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