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Profession grows while audit becomes competitive

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The number of members of accountancy bodies continues to grow to 390,000, as does challenger firms’ share of the FTSE 250 audit market, according to the Financial Reporting Council’s annual look at the trends in the accountancy profession. 

 

15th Aug 2022
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The Financial Reporting Council’s (FRC) key facts and trends, published last week, highlighted the areas of growth in the profession – from the membership across the seven accountancy bodies to the top five challenger firms increasing their share of FTSE 250 audits. 

The trends and key facts report described a healthy situation in terms of the number of students entering the profession, the slow erosion of the Big Four’s dominance over the FTSE 250 audit market and the gender balance gap slowly closing in accountancy. 

Growth in members

The 20th edition of the report first focused on the growth in numbers of members and students, finding that the seven accountancy bodies have nearly 390,000 members in the UK and Republic of Ireland. 

The Institute of Chartered Accountants in England and Wales (ICAEW) controls the biggest membership in the UK, with 135,681 members and 25,014 students. But the Association of Chartered Certified Accountants (ACCA) is gaining ground with 106,561 members and 75,188 students. The Chartered Institute of Management Accountants (CIMA) is the third-biggest professional body with 85,517 members and 47,101 students. Membership rose 2.8%.

FRC key facts and trends
(Credit: FRC Key Facts and Trends)

There were also positive signs from the student intake, with the seven accountancy bodies reporting a combined growth of 0.3% of students between 2020 to 2021. As the profession continues to grapple with recruitment challenges, the report of 161,337 students shows the strength of accountancy as a dependable job prospect.

FRC stats
(Credit: FRC key facts and trends report)

The accountancy bodies, therefore, also saw growth in their fee incomes. Unsurprisingly, since it has the biggest worldwide membership, ACCA had the highest income of the seven bodies, pulling in £223m in 2021. Meanwhile, ICAEW continued to see its income grow from 2017 to £141.4m (up from £137.5m in 2020). 

Challenger firms take on Big Four

The Big Four continued its stranglehold of the FTSE 100 audits, but competition looked to be improving elsewhere across the FTSE 350 audit market. 

The report found that the five largest accountancy firms outside the Big Four continued to increase their share of FTSE 250 firms. 

In 2017 Big Four firms controlled 96.8% of FTSE 250. Five years later and a trickle-down effect is very gradually starting to happen, as the Big Four’s share of FTSE 250 audits dropped to 89.2% and the next five largest firms picked up 10% of the audits. 

Listed company audits concentrations, 2017 to 2021
(Credit: FRC Key Facts and Trends)

The volume of the Big Four shedding clients was seen more acutely elsewhere. In 2017, the Big Four audited 74.2% of the other UK main market, but by 2021 that percentage had fallen to 57.5% and the next five firms had increased their share to 28.2%. 

In 2020, the five largest firms outside the Big Four audited 7.6% of the FTSE 350 companies and in 2021 they audited 10%.

The accountancy watchdog noted that improving competition across the FTSE 350 audit market is “one of the primary objectives as the FRC transitions to the new regulator, the Audit, Reporting and Governance Authority”. 

While the challenger firms have muscled into the FTSE 250 audits, it hasn’t dented the Big Four’s audit fee income which increased by 6.5%. Audit firms outside the Big Four also saw their audit fee income grow by 12.5%. However, the growth slowed compared to last year when the Big Four’s audit fee income increased by 7.9% and 20.9% for the non-Big Four firms. 

Fees for non-audit work also increased by 10.3% for the Big Four, while in contrast non-Big Four firms saw a decrease in non-audit work to audit clients of 6.8%.

Diversity

Another interesting trend the accountancy watchdog has been tracking is the number of female members of accountancy bodies. The report found that since 2017 accountancy bodies have seen a worldwide increase in female members, and the number continued in that trajectory over the past year from 36% in 2017 to 37% in 2021. 

ACCA is outpacing the other accountancy bodies in the percentage of female members at 48% and female students at 60%. 

Senior management, 2021 – from black, Asian, and minority ethnic backgrounds
(Credit: FRC Key Facts and Trends)

Looking more specifically at diversity in audit firms, the report found that firms with over 2,000 employees had the highest percentage of individuals from black, Asian and minority ethnic backgrounds at manager level at 17.7%. 

But at the other end of the scale, the report found that the same-sized firms had the lowest percentage of individuals from black, Asian and minority ethnic backgrounds at partner level at 7.9%.

Meanwhile, firms with 200 to 2,000 employees had the highest percentage of female senior managers at manager and director levels with 50.4% and 41.7% respectively.

 

Replies (3)

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paddle steamer
By DJKL
15th Aug 2022 09:36

Looks like per capita ICAS could be the most populous ,if one multiplies number roughly by ten to get it from a Scotland to a UK level that gives a UK equivalent of 200,000 members (although I do accept some ICAS members will be from outwith Scotland)

Frankly Scotland is fair hoaching with accountants, you cannot move for them and lawyers.

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Replying to DJKL:
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By Hugo Fair
15th Aug 2022 10:49

... and Bankers & Insurers (or are they all Financial Services nowadays)?

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Replying to Hugo Fair:
paddle steamer
By DJKL
15th Aug 2022 15:57

Lots of them as well.

I am just back from a trip to Elie in Fife this morning, that is where they all congregate.(Must be where the mothership landed)

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