The “Big Four” has become smaller – Newspaper Kommersant No. 61 (7506) dated 04/10/2023

As Kommersant found out, almost all of the Big Four auditors showed a decrease in revenue in 2022, while the average players, on the contrary, grew significantly. Experts attribute the trend to the reduction and flow of customers, as well as the departure of specialists from the largest players abroad.

The revenue of large audit companies showed a decrease in 2022, follows from their statements. So, Kept (formerly KPMG) earned 11.7 billion rubles, which is 9% lower than in 2021. Revenue of “Business solutions and technologies” (Deloitte) fell by 17%, to 5.8 billion rubles. At Technology of Trust (PwC), it decreased by 4%, to 5.8 billion rubles. B1 (E&Y) reported that the company’s revenue is “not materially different” from last year.

At the same time, the revenue of a large part of medium-sized companies in 2022, on the contrary, increased.

In particular, Finexpertiza (6th place in terms of revenue, according to RAEKS Analytics) showed an increase of 26%, to 686 million rubles, Marillion (8th place) — almost 10%, to 547 mln rub. Pacioli (included in the top 20) earned 404 million rubles, which is 15% more than in 2021. Revenues of Rosexpertiza (14th place) grew by 6%, to 400 million rubles.

According to experts, the revenue of large companies decreased due to the redistribution of customers and the outflow of personnel. Kommersant’s interlocutor in the audit market notes that many employees of the Big Four left to work abroad after the outbreak of hostilities in Ukraine, which “reduced the companies’ capabilities.” At the same time, international clients left the Big Four, and some Russian ones also stopped using its services, the Kommersant source adds. According to independent expert Andrei Barkhota, the flow of orders from the largest players to the middle ones is 5-15%.

If earlier the client’s priority was to attract foreign investors and the audit report of the Big Four played a “certain advertising role”, then in connection with the state policy of accelerated import substitution, the audit reports of international companies have lost their former significance, explains Vladislav Karastelin, managing partner of Dokar Consulting . In addition, the regime of widespread savings also touched on the audit: why pay for a “brand” conclusion, if in content and informativeness it is no different from that issued by a less “eminent company”, he adds. Vladimir Biryukov, Managing Partner of the Audit Services Department at DRT, clarifies that, in general, the number of transactions in the capital markets accompanied by auditors has decreased several times compared to 2021.

Experts are sure that the revenue of large audit companies will grow, but at a slower rate than that of medium-sized ones.

According to Mr. Barhota’s estimates, the revenue of the successors of the Big Four companies could grow by 5-15%, while the revenue of the second-tier companies will show stronger dynamics – 10-20%.

According to the President of Pacioli, Svetlana Romanova, 2022 passed by inertia: the contracts, the execution of which fell on 2022, were signed in 2021 – early 2022. Therefore, there are expectations that in the future the redistribution will take place towards more comfortable prices and medium-sized companies, she notes.

Large auditors will seek to compensate for the reduction in revenue in 2023 with flows from consulting services, in addition, there will be an attempt to revive the topic of services in the field of sustainable development and ESG, adds Mr. Barhota. According to RAEKS Analytics, in 2021, companies’ income from audit as a whole accounted for 35% (about 29 billion rubles), and from consulting – 65% (54 billion rubles). A year earlier, the ratio was in favor of the audit – 59% (about 24 billion rubles) against 41% (17 billion rubles).

Mr. Karastelin emphasizes that this year there will be certain difficulties in the rotation of audit personnel in companies – in particular, due to the high dropout of applicants for certificates. Another important question, he notes, is whether international accounting and reporting standards will be further implemented: the prospects for the revenue of the largest companies that traditionally audit according to IFRS depend on this.

Julia Poslavskaya