Note: All amounts stated are in Canadian dollars
In 2020, Canadian auditor departures decreased by 31.9%, with 230 departures observed throughout the year, compared to 338 departures seen in 2019. The percentage of resignations saw a break in the trend, with only 24% of auditor departures due to resignations in 2020, compared to 31% in 2019. Auditor changes due to dismissals increased to 76% in 2020; this is up from the 69% last year, though the dismissals in 2019 represented a five-year low.
As mentioned in a recent Canadian Accountant article, “The COVID-19 pandemic affected the entire accounting profession in 2020, including the public practice sector in general and the Big Four accounting firms specifically, despite the reputation of accounting as recession-proof. Multiple sources reported reduced compensation for partners and layoffs throughout the year at the Big Four.”
The table below presents a comprehensive view of the gains and losses of the Big Four and national firms in Canada during the first half of 2020. It shows the number of SEDAR audit clients each auditor gained or lost, and the auditor from or to which the client was won or lost.
For the second year in a row, Davidson & Company LLP accounts for the most new client engagements among all firms in 2020, with 26 client gains. With a net of eight new SEDAR audit clients, this is the fifth consecutive year the national firm has ranked among the top five in terms of net auditor engagements. Davidson & Company gained approximately $2.3 million in audit fees and increased its market cap by $382.8 million, primarily through the gain of three large companies:
- Almonty Industries Inc. contributed a market cap of $111.9 million;
- Heritage Cannabis Holdings Corp. (formerly Umbral Energy Corp.) contributed a market cap of $54.5 million; and
- Copper Fox Metals Inc. contributed $49 million in market cap.
McGovern Hurley LLP, formerly a member of UHY International, joined the RSM network near the end of 2019. They netted eight new SEDAR audit clients in 2020 with 15 client gains and seven losses.
This was an interesting year for the top five net auditor engagements; the top three audit firms recorded zero departures. As noted by the Canadian Accountant, Baker Tilly WM LLP led the way with 12 new engagements and no departures as a result of the merger between Wolrige Mahon, Collins Barrow Vancouver, and CW Group. The second place firm, Clearhouse LLP Chartered Professional Accountants, was also the result of a merger between SDVC LLP, Huron Partners LLP, and Pinnacle Valuation Group. They posted 11 new engagements with zero departures.
Ernst & Young LLP led the way for the Big Four firms, netting two new audit clients with $3.9 million in new audit fees. As noted in Canadian Accountant’s article, the departure of BlackBerry Limited to PwC resulted in a loss in net audit fees for the year. While PwC only gained one net audit client, they led the Big Four in market cap gains ($10.2B) and audit fees gained ($7.86M).
PwC saw the largest increase in market cap during the year, gaining over $10.2 billion. This was largely due to the engagement of two new clients: First Quantum Minerals Ltd, a mining and metals company, and BlackBerry, the multinational enterprise software company that sparked the interest of many retail investors earlier this year. These same two companies were the main contributors to PwC’s large increase in audit fees.
The majority of EY’s increase in market cap was from the engagement of Genworth MI Canada Inc. (now known as Sagen MI Canada Inc.), which provides insurance for Canadian residential mortgage lenders.
PwC and KPMG were on top of the field in total audit fees gained. As mentioned above, PwC saw the majority of their audit fees come from two new clients. KPMG’s increase in audit fees was more diversified over their 17 new clients, but the largest increase of $2 million was from Turquoise Hill Resources Ltd.
MNP LLP cracked the top five due to their engagement of CANSORTIUM INC. – which brought in $1.25 million in fees. Davidson also had a presence in the top five gaining about $2.35 million in new client audit fees.
This analysis uses data from the Canada Auditor Changes database, powered by Audit Analytics.
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