Who Audits Public Companies – 2021 Edition

The number of SEC registrants increased 0.7% since last year, climbing from 5,985 in 2020 to 6,030 in 2021. 2021 is the second year in a row we’ve observed an increase in SEC registrants. This pattern is a departure from decreasing registrant numbers seen year-over-year in 20172018, and 2019. A portion of this increase can be attributed to the record number of IPOs conducted in 2020. This post examines which firms are auditing these public companies and the audit firm market share based on filer status.

As mentioned by Accounting Today, the top ten firms by registrant counts – EY, Deloitte, PwC, KPMG, Marcum, Grant Thornton, BDO, Withum, BF Borgers, RSM – increased their combined market share since last year. Together, these ten firms audit 66.9% of the 6,030 public registrants, up from 65.7% in 2020. This continues an upward trend for the top ten audit firms in terms of market concentration for SEC public registrants; in our 2014 update, the top firms audited just 56.9% of the population.

Similar to last year, we are continuing to see changes in how registrants identify their filing status. These changes are due to the SEC reporting amendments that expanded the scope of a smaller reporting company. The updated filer guidelines permit registrants to identify as a smaller reporting company, or both a smaller reporting company and either an accelerated or non-accelerated filer.

This definition change increased the number of eligible smaller reporting companies without changing the “accelerated” filer threshold, which requires an auditor’s attestation of management’s assessment of internal control over financial reporting.

The shift in filer status is evident in the market share analysis. Since last year, the population of Large Accelerated filers decreased in population by 6%. Meanwhile, the population of Accelerated filers decreased by 37.1%. Conversely, the amount of companies identifying outside those filer statuses increased 19.8% since our 2019 update. An update from before the amendments went into effect.

The methodology for this analysis gives large accelerated and accelerated filer statuses precedent over those companies that opted to identify as both large accelerated or accelerated filer and smaller reporting company, as these companies “remain subject to the requirements that apply to accelerated filers.”

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Large Accelerated Filers

With 563 company audits, EY audits 29.7% of large accelerated filers, including companies that identified as both a large accelerated filer and smaller reporting company. In fact, the Big Four firms audit the vast majority – almost 91% – of large accelerated filers. Outside of the Big Four, there are 28 other firms that compete for the remaining 9.3% of the large accelerated filer registrant market.

Accelerated Filers

The Big Four, together with Grant Thornton and BDO, audit the greatest number of accelerated filers. This number includes companies that identify as both an accelerated filer and smaller reporting company, accounting for over 72% of the market. Fifty other firms audit the remaining 226 companies.

Non-Accelerated Filers

The Big Four and Marcum account for 57.5% of the non-accelerated filer audit market. The remaining 42.8% is shared between 67 firms.

Smaller Reporting Companies

The Big Four largely dominates the audit firm market share of large public companies. As a result, the audit firm market share of smaller public companies is more diverse. There is significant competition among firms auditing smaller companies, with 697 smaller reporting company registrants audited by 184 firms.

Seven firms hold the top 25% of the smaller reporting company audit market: BF Borgers, M&K CPAs, Boyle CPA, Prager Metis, RBSM, Turner Stone & Company, and Baker Tilly. The remaining 75% of the market is audited by 177 other firms, with 72 firms each auditing only one smaller reporting company.

Non-Accelerated Filers and Smaller Reporting Companies

Auditor market share for filers that identify as non-accelerated and a smaller reporting company sees variation similar to the small reporting company registrant market. The top six firms – Marcum, Withum, EY, BDO, Deloitte, and KPMG – audit 40.7% of this market. The remaining market is shared among 188 other firms.

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