Looking at auditor tenure as a whole across a population of 4,356 SEC registrants, 49.2% have engaged an audit firm for less than 10 years, while 4.9% have engaged an auditor for 50 years or more. A very small portion of companies – 0.5% – have engaged an audit firm for more than 100 years.
When looking at companies across all revenue groups and across all auditors, the average tenure length is 15.0 years, with a median of 10 years.
For companies in this population audited by the Big Four audit firms, the average tenure is 18 years, with a median of 13 years. Excluding companies audited by the Big Four audit firms, the average tenure decreases to 8.3 years, with a median of 6 years.
To look at auditor tenure based on revenue, the population of public companies in this analysis was divided into normalized quartiles, with the first quartile consisting of companies with the lowest reported revenue, and the fourth quartile having the highest reported revenue.
This analysis shows a positive relationship between revenue and average and median tenure length; as revenue increases, so does the length of auditor tenure. This indicates that companies with a higher revenue are more likely to retain their audit firm for longer periods of time.
To get a better sense of auditor tenure amongst the revenue quartiles in comparison to established indices, the average and median auditor tenure in the Russell 3000 and S&P 500 were examined.
The Russell 3000, with an average revenue of $5.8 billion, has an average auditor tenure of 17.9 years, with a median of 13 years. In comparison, the S&P 500, with an average revenue of $25.7 billion, has an average auditor tenure of 32.7 years, with a median of 23 years, surpassing the tenure length for companies in the fourth revenue quartile.
The top 10 longest auditor tenures in this population are all held by companies in the fourth revenue quartile and have revenues greater than $1.9 billion. The top 10 companies have auditor tenures greater than 100 years and are all audited by a Big Four firm. The longest auditor tenure is held by Deloitte, who has audited the communications company BCE Inc. [NYSE: BCE] since 1880.
The Big Four have an exclusive monopoly of the top 3.8% of companies in terms of tenure length for this population; they hold the top 164 longest auditor tenures, engaged since 1967 or earlier. The longest auditor tenure held by a firm outside the Big Four belongs to Monroe Shine & Co., who have audited First Capital Inc. [Nasdaq: FCAP] and First Savings Financial Group [Nasdaq: FSFG] since at least 1968.
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