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Audit Firm Market Share of Companies with Revenue Between $10M and $150M

09.12.18

In a previous analysis of auditor market share, we focused specifically on auditors within the Russell 3000. Here, we will provide an in-depth analysis of the audit firm market share for all public SEC registrants specifically with revenues between $10 million and $150 million in fiscal year 2017.

In this population of companies, there are 181 audit firms that compete for a share of the market. Of the 2,051 registrants examined, PricewaterhouseCoopers, Ernst & Young, KPMG, and Deloitte (The Big Four) account for just over 50% (or 1,040 companies).

When it comes to non-Big Four firms, there is a significant amount of market share competition. The 177 non-Big Four firms have a combined market share of slightly less than 50%, less than the total market share of The Big Four.

The Big Four are engaged by over 200 companies each, followed by BDO USA, engaged by 97 companies. BDO is followed by RSM, Grant Thornton, Moss Adams, and Crowe.

There are 22 firms (including The Big Four) that represent 80% of the market share. The other 159 audit firms compete for a market share of the remaining 400 companies.

Rounding out the top 80.50% of the market share are four audit firms tied with 14 company engagements each (0.68% of market share): BPM, CohnReznick, RBSM and SR Snodgrass. This illustrates the stark contrast in the amount of company engagements by Big Four and non-Big Four firms, and the effect on the overall market share.

Generally, the percentage of audit firms decreases as the number of company engagements increases. As demonstrated in the chart below, the highest concentration of audit firms competes for the smallest percentage of company market share.

There are 91 audit firms that only audit one company in this registrant population. Despite composing 50% of the total audit firms, these 91 firms have only 4.44% of the market share. In fact, 85% of non-Big Four audit firms have engagements with ten companies or less.

The Big Four comprise 2.21% of the 181 audit firms, but they have a market share of 50.71% of companies.

Market share broken down by company revenue drops off sharply after $50 million revenue, as illustrated in the graph below. For companies with revenues between $10 million and $30 million, there are 130 audit firms competing for over 35% of the total companies in this population. This is a significant contrast between companies with higher revenues, as the amount of audit firms decreases as revenue increases.

Companies with revenue between $130 million and $150 million (about 5% of companies in this population) only engage 20 different audit firms.

There is less variation among companies with revenues in the middle of the population, with only a difference of 8 audit firms between the range of $70 million to $90 million and the range of $110 million to $130 million.

The breakdown of audit firm market share based on 2017 company revenue remains relatively constant when the Big Four are excluded, despite the domination of the overall market share, indicating the Big Four do not dominate in any one revenue range.

As could be expected, the Big Four audit firms dominate the market share of companies with revenues between $10 million and $150 million, resulting in a high concentration of audit firms competing for a small slice of the market share. This competition increases as company revenue decreases.

This is Part 1 of a post exploring market share of audit firms for companies with revenues $10 million to $150 million. Stay tuned for Part 2 that will exclusively discuss audit firm tenure in this company population.

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