Auditor Changes Roundup: Q4 2019

BF Borgers CPA and Wipfli, each with a net of five new SEC audit clients, account for the most new SEC audit clients among all firms in Q4 2019.

In terms of new client engagements in Q4 2019, BF Borgers CPA’s six new engagements was the highest of any firm. There was a tie for second place in terms of the number of new engagements, with BDO USA and Wipfli each winning five. As mentioned in Accounting Today, Wipfli’s five engagements were the result of a merger with Porter Keadle & Moore in October 2019. Three of BDO’s engagements were a result of their recent merger with Peterson Sullivan as of November 2019.

As seen in the matrix below, there were 24 new engagements and 33 departures during Q4 2019 among the major global and national firms. This is a decrease from the 38 new engagements seen in Q3 2019, but is similar to the 27 engagements observed in Q4 2018.

The table below presents a comprehensive view of the gains and losses of the major global and national firms. It shows how many SEC audit clients each auditor gained or lost, and also the auditor from or to which the client was won or lost.

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Leading the way among the Big Four audit firms, Deloitte gained four new SEC clients in Q4 2019, followed by EY with a gain of three new SEC clients.

Among the other global & national firms, BDO and Marcum (including Marcum Bernstein Pinchuk) each gained a total of five new SEC clients. Three of the new engagements for BDO USA can be attributed to their recent merger with Peterson Sullivan.

Among the Big Four firms and the other global & national firms, RSM and Moss Adams each had a positive net engagement of one client, making them the only firms out of the twelve firms presented in the matrix to have a positive net engagement in Q4 2019.

Since 2016, the fourth quarter has seen the least overall auditor change activity among the major global and national firms. Considering many companies – especially large companies – have a fiscal year end date on or around December 31, it makes sense that the majority of auditor changes would occur in the first and second quarter, or within 180 days of the end of the fiscal year end. A change of auditor in the middle of preparing annual financial statements could be a signal that issues exist between the auditor and the client.

In the following tables, we disaggregate the auditor changes by the size of companies gained or lost, as represented by the companies reported filing status. The first table shows auditor changes for Large Accelerated Filers, i.e. those with a worldwide public float of more than $700 million.

There was minimal movement in Large Accelerated Filer audit clients in Q4 2019, with only two wins and three losses for all firms overall. Two firms each picked up one new Large Accelerated Filer: Deloitte and EY.

No other firms had positive net engagements for Large Accelerated Filers in Q4 2019.

Since Audit Analytics began performing this auditor change analysis in 2014, the third and fourth quarters have consistently seen the least amount of auditor change activity among Large Accelerated Filers. As mentioned previously, this slowdown in activity in the second part of the year could be attributed to many companies waiting to change auditor until after the end of their fiscal year and their annual report is filed.

The next table presents a sample of the largest wins and losses for Accelerated Filers, which are companies with public float between $75 million and $700 million. Companies identifying as an Accelerated Filer + Smaller Reporting Company are included in the analysis for Accelerated Filers, as these companies remain subject to the requirements that apply to Accelerated Filers, including a required auditor’s attestation of management’s assessment of internal control over financial reporting.

Wipfli topped the list among Accelerated Filers, netting two new SEC audit clients in Q4 2019. For Accelerated Filers, five audit firms each netted one new client.

The last table presents the top gains and losses for Smaller Reporting Companies. Companies in this population are a combination of companies that did not identify as Large Accelerated Filers, Accelerated Filers, or Accelerated + Smaller Reporting Company. For a further disaggregated list by all separate filer statuses, please contact us.

BF Borgers CPA, with a net of five new SEC audit clients, was the top firm among Non-Accelerated Filers and/or Smaller Reporting Companies. There were eleven firms that each gained a net of two new SEC audit clients in Q4 2019.

There were 21 audit firms that each netted one new Non-Accelerated and/or Smaller Reporting audit client, and 33 firms that lost a net of one client.

In total, for Non-Accelerated Filers and/or Smaller Reporting Companies during Q4 2019, there were 79 engagements and 95 departures.

This analysis was created using the Auditor Change database, powered by Audit Analytics. Audit Analytics tracks audit fees, restatements, and a wide range of audit and regulatory disclosures, with the ability to create daily email alerts for new disclosures by industry, auditor, and location.

To learn more about the Auditor Change database, or for subscription information, please contact us.