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Auditor Changes Roundup: Q1 2023

Auditor Changes Roundup Q1 2023

Cohen & Company was leader for new SEC audit clients in the first quarter of 2023. In March, the firm finalized the acquisition of a Philadelphia-based accounting firm, BBD LLP’s Investment Management Group. According to Accounting Today, “the firm expected that the combination would make it the second-largest auditor of exchange-traded funds and fourth-largest registered funds auditor in the U.S. by number of funds.” As a result of this acquisition, Cohen & Company gained ten new clients during the quarter, all of whom were previously audited by BBD.

Grant Thornton followed with a net gain of seven clients. Ranking third for net auditor clients, Nigerian firm Olayinka Oyebola & Co gained six new engagements during the quarter. Deloitte ranked fourth with 13 new engagements and eight departures for a net of five new clients. Lastly, Reliant CPA and Michael Gillespie & Associates tied for fifth with four new engagements each.

Global & National Firms

Overall, the top ten global & national audit firms gained 61 and lost 66 clients during Q1 2023. Compared to Q4 2022, engagements decreased by 14% while departures more than doubled for these top firms.

The table below presents a complete view of the gains and losses of the major global and national firms. It shows the number of SEC audit clients that each auditor gained or lost. Additionally, it shows which firm the client was won from or lost to.

Grant Thornton had the most net client gains among global and national firms, pulling in seven new clients overall. While five other firms had positive net gains, the remaining four firms experienced net losses throughout the quarter.

For the fourth consecutive quarter, BDO saw the most net client losses among the global and national firms, losing nine clients overall in Q1 2023. Marcum followed closely with a net loss of eight clients. Breaking their two-quarter reign as the leader for new SEC clients, Marcum had 16 total departures, the most of any firm in during the quarter.

The Big Four

For the second consecutive quarter, Deloitte saw the largest client gains among the Big Four firms. They had the most total new engagements of any firm at 13, and saw an overall net gain of five clients. PwC continued to make positive net client gains while EY saw a net loss of three clients this quarter. KPMG continued to see the most net losses among the Big Four firms, losing a net of three clients in Q4 2022 and another five in Q1 2023.

The Big Four firms had a collective total of 32 engagements and 32 departures during the quarter. Among all new engagements for the Big Four firms, 56% were gained from other Big Four firms, 34% from global and national firms, and 9% from regional and local firms. Among Big Four departures, 63% were lost to other Big Four firms, 31% to global and national firms, and 6% were lost to regional and local firms.

Market Cap and Audit Fee Gains

EY gained by far the largest net market cap in Q1 2023. This was mainly due to their gain of Monster Beverage Corp as a client. The California-based energy drink company added $53.2 billion to EY’s new market cap gains. Having previously been audited by Deloitte, Monster Beverage changed auditors for the first time in over 30 years this quarter.

In terms of audit fees, Grant Thornton led with a net of $19.1 million in the first quarter of 2023. America’s leading newspaper publisher, Gannett Co., Inc. contributed $6.4 million to Grant Thornton’s total as well as global technology solutions company, Unisys Corp. who added $5.8 million.

*Auditor changes due to mergers & acquisitions are counted as a departure but not an engagement. Usually, if an M&A results in a disclosed auditor change, it is simply disclosing that the auditor of one of the companies is being dismissed while the auditor of the other company is being retained. The retention results in a larger engagement, but it’s not a gain of a client. On the other hand, the firm that loses a client through an M&A will have one fewer client. So, for that reason, we include these losses.

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