There is a highly concentrated audit market among the companies listed on the Continuous Market of the Bolsas y Mercados Españoles (BME) in Spain. Sixteen accounting firms were engaged by 131 companies headquartered in Spain at the end of 2019, with the Big Four accounting for 85% of the market share. Capturing just 2% of the market each are Grant Thornton, BDO, and Luis Caruana & Asociados. The remaining nine firms audit just one percent of the market each. Four companies have a joint audit and engage two auditors each.
Among the Big Four, the market is shared relatively evenly, with PwC and EY auditing 31 companies each, followed by Deloitte with 27 and KPMG with 26.
PwC leads the Big Four on the IBEX 35 with 11 engagements, followed by KPMG with nine, and Deloitte and EY with seven each. The market cap of the IBEX 35 companies is distributed in the same order, ranging from PwC, who audits companies worth almost €160 billion to EY, who is responsible for companies with a combined market cap of €113 billion.
Three companies on the IBEX 35 have announced auditor changes for 2020 and 2021. Bankia SA and International Consolidated Airlines Group SA are changing from EY to KPMG and Ferrovial is changing from Deloitte to EY. In 2020, KPMG will tie PwC at the top with 11 engagements each, while EY and Deloitte will each have six.
IBEX Medium Cap
On the IBEX Medium Cap index, PwC and Deloitte have the most audit engagements at eight and seven, respectively, followed by EY with four and KPMG with three engagements. PwC is responsible for over €16 billion in market cap, while KPMG accounts for just €5 billion.
Due to auditor changes in 2020, KPMG and Deloitte will lose one client each to EY. The new makeup of the mid cap index will still be led by PwC at 32% with Deloitte and EY tied with 27% each, while KPMG will have only two clients, or 9% of the market.
IBEX Small Cap
Deloitte is the top auditor for the small cap index, auditing nine companies, followed by EY with eight, PwC with six, and KPMG with five engagements each. The total market cap of the companies on the IBEX Small Cap is €14 billion. Audit Analytics has recorded only one auditor change so far on the Small Cap – Obrascon Huarte Lain SA will change from Deloitte to EY.
The Big Four hold the bulk of the market share among the remaining firms that audit the Continuous Market of the BME. The top accounting firm is EY, who audits 24% of the companies. Next is KPMG (18%), PwC (12%), and Deloitte (8%). There are 12 other firms who audit listed companies in Spain. Grant Thornton, BDO, and Luis Caruana & Asociados audit 6%, or three companies each. Moore Stephens and Crowe audit two companies, followed by seven firms who audit the remaining companies. The total market cap of the remaining 49 companies is just over €14 billion.
Spain’s Implementation of Audit Reform
As permitted, Spain modified the regulation around auditor appointment and duration as follows:
- Minimum initial engagement – three years
- Maximum firm engagement – 10 years
- Single audit – no option to extend
- Joint audit – option to extend four more years
Spain also expanded the PIE definition beyond the EU definition of credit institutions, insurance undertakings, and listed securities to include also alternative stock market listed entities, banking, payment, and electronic money institutions, investment companies, pension funds, and other entities of a certain size, as well as “company groups where the parent company is one of the entities above.” Finally, Spain adopted the 70% cap on non-audit services with its own definition of valuation services for PIEs.
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