Big churn for Deloitte, EY, others as 984 listed firms to rotate auditors

Big audit firms are likely to feel the most severe impact yet of rotation of auditors, mandated by the new company law three years ago, as a majority of listed companies are complying this year. As many as 984, or 58 per cent, of NSE-listed companies are rotating auditors in 2017-18, according to an estimate by Prime Database. This is close to five times the rotations recorded in the previous year. Around 206 companies saw rotation in FY17.  

The rotation is likely to benefit smaller audit firms as they are likely to gain new accounts vacated by the Big Four and other large firms. Data released by Prime showed that among the Big Four, the Deloitte group saw its audit fees come down by around Rs 30 crore, or 12 per cent, in FY17 to Rs 220.98 crore. The network, which includes firms such as AF Ferguson, SB Billimoria and Deloitte Haskins and Sells, however, increased the number of companies audited to 162 from 156 and remained on the top in terms of both fee earned and the number of companies audited. 

While KPMG and EY saw both fees and clientele go up, Price Waterhouse saw the fee earned in 2016-17 fall marginally to Rs 50 crore. 

The Big Four, among them, handled 420 assignments out of the total 1,589 companies, or 26 per cent of the total, in 2016-17. Their dominance was even stronger in the Nifty-500 subset, wherein they handled 253 of the 500 audits, or 51 per cent of the total.  

The top 10 audit firms accounted for auditing of as many as 575 companies, or 36 per cent of the total. Leading the league table was the Deloitte group with 162 companies, followed by EY Group (117), KPMG Group (84), and Price Waterhouse Group (73).

On an overall basis, as many as 854 audit firms audited the 1,589 NSE-listed companies in 2016-17. This implies that, on an average, an audit firm audited 1.86 companies.

Going forward, in line with the regulations around auditor rotation, which kicked in from April 1, 2017, the tenures of 145 auditors in 139 companies shall expire in 2018-19, 123 auditors in 121 companies in 2019-20, 132 auditors in 128 companies in 2020-21, and a huge 889 auditors in 868 companies in 2021-22.

Ranking by Audit Fees

Rank

Auditor Name or Group

Total Audit Fees (Rs in crore) in FY17

Total Audit Fees (Rs in crore) in FY16

Change 

(Rs in crore)

1 DELOITTE GROUP (DELOITTE HASKINS & SELLS, DELOITTE HASKINS & SELLS LLP, A F FERGUSON & CO, C C CHOKSHI & CO, FRASER & ROSS, P C HANSOTIA & CO, S B BILLIMORIA & CO 220.98 251.57 -30.59 2 EY GROUP (S R B C & CO LLP, S R BATLIBOI & ASSOCIATES LLP, S R BATLIBOI & CO LLP, S V GHATALIA & ASSOCIATES LLP) 120.56 98.83 21.73 3 KPMG GROUP (B S R & ASSOCIATES LLP, B S R & CO LLP, B S R & COMPANY, B S R AND ASSOCIATES, B S R AND CO, B S R AND COMPANY) 110.08 87.62 22.46 4 SINGHI & CO 62.20 54.29 7.91 5 PRICE WATERHOUSE GROUP (PRICE WATERHOUSE , PRICE WATERHOUSE & CO, PRICE WATERHOUSE & CO CHARTERED ACCOUNTANTS LLP, PRICE WATERHOUSE & CO BANGALORE, PRICE WATERHOUSE, BANGALORE, DALAL & SHAH, LOVELOCK & LEWES) 50.24 52.97 -2.73 6 WALKER CHANDIOK & CO LLP 41.45 30.18 11.27 7 G D APTE & CO 31.61 12.88 18.73 8 B RATTAN & ASSOCIATES 30.34 11.38 18.96 9 GROVER LALLA & MEHTA 30.34 11.38 18.96 10 CHATURVEDI & SHAH 29.02 36.86 -7.84

Source: Prime Database