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  • BDO becomes second-largest auditor of listed UK companies

BDO becomes second-largest auditor of listed UK companies

25 August 2020

Shake-up in sector has driven an increasing number of companies to firms outside the Big Four

BDO now audits the second-highest number of listed companies in the UK as moves to shake up the sector have driven an increasing number of companies to firms outside the Big Four. BDO, the UK’s fifth-largest accounting firm by revenue, gained 35 listed clients in the 12 months to May, according to Adviser Rankings, which collects auditor data.

It now audits 297 listed companies, second only to PwC, with 326. KPMG audits 63 fewer listed companies compared with this time last year and is in third place with 286 listed clients.

The rise in BDO’s numbers suggests a shift in boardroom attitudes. It is the first time a mid-tier auditor has been in second place for listed client numbers.

The firm has benefited from changes at its larger rivals, which have raised their fees and abandoned risky clients in the face of closer scrutiny of their work by regulators.

Scott Knight, head of audit at BDO, said: “Four independent reviews in the last year set out a clear need for more choice in the audit market. We’re now beginning to see a shift in the right direction.”

He added that the pandemic had slowed the pace of change, with some companies delaying audit tenders, but BDO expected that it would pitch for more listed audits later this year.

The Big Four firms — KPMG, PwC, Deloitte and EY — have been criticized over accounting problems and corporate collapses at high-profile businesses such as BHS, Thomas Cook and Carillion. They have been accused of failing to warn about the deteriorating financial health of businesses they audited, leaving shareholders and staff out of pocket when the companies failed.

As a result, the UK government is considering proposals to force large listed businesses to appoint one of the Big Four and a smaller “challenger” firm to conduct joint audits. It is also weighing whether to impose a cap on the number of listed companies any one firm can audit. Smaller firms have had an increase in audit approaches from big companies as a result.

Among the very largest businesses, however, the Big Four’s standing has improved. Last year, the number of FTSE 100 audits performed by the Big Four increased from 96 to all of the 100 companies in the index.

BDO took on 10 FTSE 250 audits in the past year. Recent wins include housebuilder Galliford Try, investment manager AJ Bell and estate agent Foxtons. It now audits 18 companies in the FTSE 250.

The firm leapfrogged Grant Thornton as the UK’s fifth-largest auditor by fee income last February when it acquired rival Moore Stephens. BDO made profits of £134m last year on £578m of revenues. KPMG, the smallest of the Big Four, made profits of £307m on revenues of £2.4bn.

Grant Thornton, once considered the main challenger to the Big Four, has retreated in the past two years after a number of audit scandals, including at Patisserie Valerie and AssetCo. The firm now has 116 listed clients, including four FTSE 250 companies and 85 that are listed on the junior Aim market.

BDO’s offices in London. The firm audits 297 listed companies, second only to PwC © Alamy Stock Photo

Written by: Tabby Kinder JUNE 10 2020

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