Note: All amounts stated are in Canadian dollars
Throughout 2019, Canadian auditor departures increased 16.6%, climbing to 338 departures from the 290 departures seen in 2018. The percentage of resignations has continued to trend upward, with 31% of auditor departures due to resignations in 2019, compared to 20% in 2018. On the other hand, auditor changes due to dismissals is the lowest it has been in five years, accounting for 69% of all departures.
The table below presents a comprehensive view of the gains and losses of the Big Four and national firms in Canada during 2018. It shows how many SEDAR audit clients each auditor gained or lost, and also the auditor from or to which the client was won or lost.
Davidson & Company LLP – with a net of 26 new SEDAR audit clients – accounts for the most new clients among all firms in 2019, resulting from 42 client gains and 16 losses. This is the fourth consecutive year the national firm has ranked among the top five in terms of net auditor engagements. Davidson & Company gained a total of $3.1 million in audit fees and increased its market cap by $1 billion, primarily through the gain of three large companies:
- HIVE Blockchain Technologies Ltd brought a market cap of $226 million;
- Halo Labs Inc (formerly Apogee Opportunities Inc) contributed market cap of $96.3 million and;
- Eve & Co Incorporated (formerly Carlaw Capital V Corp) contributed $88.5 million in market cap.
Fellow national firm Grant Thornton also fared well in terms of net engagements, coming in third place for the year; the firm had 12 engagements and 6 losses, resulting in 6 net engagements. New client Mene Inc was responsible for boosting GT’s market cap by $185.9 million and audit fees by $0.1 million, for a total market cap of $346.8 million and new audit fees of $0.6 million.
Interestingly, almost half of GT’s new client engagements came from Big Four auditors, including Mene Inc, while all but one of their losses were to fellow national firms and regional & local firms.
As the sole Big Four audit firm to rank among the top five, KPMG LLP came in second in terms of net engagements, with 24 gains and 16 losses for a net of 8 new engagements. As noted by the Canadian Accountant in their breakdown of auditor changes among the Big Four, the largest gain for KPMG was Suncor Energy Inc. This new client contributed a market cap of $88.6 billion and audit fees of $5.2 million. The firm ended the year with a gain of $91.5 billion in market cap and $8.7 million in new audit fees.
The market cap gained by KPMG was astronomical in comparison to the rest of the top five market cap gains, which hovered between totals of $1 billion to $3 billion. Ernst & Young LLP came in second by adding just under $2.8 billion to its market cap total, despite having a negative net gain of engagements. This was due, in large part, to the engagement of Charlotte’s Web Holdings, Inc (formerly Stanley Brothers Holdings Inc), which resulted in a market cap gain of $1 billion for the Big Four firm.
Further highlighting KPMG’s accomplishments in regards to Canadian auditor engagements, the Big Four firm also claimed first place in the category of total audit fees gained, with $8.7 million in new audit fees. Two energy companies contributed a significant portion of KPMG’s new audit fees: Suncor Energy Inc (which also contributed a large majority of market cap to the audit firm) provided $5.2 million and Canacol Energy Ltd provided $1 million in audit fees.
Mirroring the rankings for top five in market cap gained, EY came in second place in terms of audit fees gained, with a total of $3.7 million in new fees. MAV Beauty Brands Inc and Harvest Operations Corp helped drive this victory with audit fees of $0.7 million and $0.5 million, respectively. National firm Davidson & Company came in slightly behind EY with new audit fees of $3.1 million, chiefly fueled by the addition of Planet 13 Holdings Inc’s $0.5 million in fees.
Audit Analytics tracks audit fees, auditor changes, controls, and restatements for Canadian issuers.