In 2021, Canadian auditor departures increased by 68.3%. Throughout the year, 387 departures occurred, compared to 230 departures seen in 2020. The percentage of departures classified as resignations saw a slight increase, with 25% of auditor departures attributed to resignations in 2021, compared to 24% in 2020. Auditor changes due to dismissals decreased to 74% in 2021; this is down from the 76% last year, trending closer to the average dismissal rate after a five-year low observed in 2019.
This was the fifth year that Audit Analytics was given the opportunity to provide the SEDAR analysis for the Canadian Accountant, Canada’s independent news source for the accounting profession. As noted in their report, we publish half-year and year-end reports separating the reporting into Big Four accounting firms, as well as reporting on the mid-market tier of accounting firms in Canada.
Net Engagements from Auditor Changes in Canada
The table below presents a comprehensive view of the gains and losses of the Big Four and national firms in Canada during the year 2021. It shows the number of SEDAR audit clients each auditor gained or lost. Additionally, it shows the auditor from or to which the client was won or lost.
Continuing the trend from the semi-annual analysis, KPMG led the way with the most new client engagements among all firms in 2021. They had 42 client gains. With a net of 23 new SEDAR audit clients, this is the fifth consecutive year the Big Four firm has broken even or netted a positive gain in terms of total auditor engagements, as seen in the Audit Analytics Auditor Changes in Canada series.
The top five net auditor engagements in Canada changed significantly in 2021, with a new top five than we saw in 2020.
As mentioned previously, KPMG dominated during the year, netting 23 new engagements. Kingston Ross Pasnak and Harbourside CPA both netted ten new engagements. Macias Gini & O’Connell and Zeifmans followed closely behind netting nine and eight new engagements respectively.
Market Cap and Audit Fee Gains from Auditor Changes in Canada
Note: Amounts stated in Canadian dollars
EY saw the largest increase in market cap during the year, gaining approximately $62.98 billion. This gain was boosted by the addition of Canadian Pacific Railway Limited as a client, one of the largest mainline freight rail transportation companies in Canada.
While PwC ended up losing more clients than gaining in the year, they placed second in terms of total market cap gains. PwC netted a whopping $56.88 billion. The majority of PwC’s increase in market cap was from the engagement of Loblaw Companies Limited. The Canadian retailer encompassing corporate and franchise supermarkets brought in over $28.8 billion in market cap.
In 2021, KPMG saw an overall decrease in their net market cap from auditor changes in Canada. But, they still had some big winners, highlighted below:
- Saputo Inc. contributed a market cap of $16.35 billion;
- GFL Environmental Inc. contributed a market cap of $14.31 billion; and
- Galaxy Digital Holdings Ltd. contributed $1.89 billion in market cap.
For the second year in a row, PwC and KPMG gained the most audit fees from auditor changes. A large portion of PwC’s audit fee increase – over $8.8 million – came from one of Canada’s largest conglomerates: George Weston Limited. The company filed change of auditor notices for four companies: George Weston Limited, Choice Properties Real Estate Investment Trust, Eagle Credit Card Trust, and Loblaw Companies Limited.
KPMG gained approximately $8.9 million in audit fees during the year. The bulk of their increase came from the addition of Galaxy Digital Holdings. The financial services and investment management innovator brought in over $17.5 million in audit fees for the firm.
Marcum cracked the top five this year in terms of net audit fees gained. This is due to the addition of Trulieve Cannabis Corp, which brought in over $1.3 million in new fees.
This analysis uses data from the Canada Auditor Changes database, powered by Audit Analytics. The database covers all SEDAR registrants who disclosed an auditor change in an electronic filing after 2000.
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