Who Audits Smaller Public Companies – 2021

In 2020, 3,317 SEC registrants filed as either a Non-Accelerated filer, Smaller Reporting Company, or both. This population of companies comprised over half – 55.0% – of the 6,030 SEC-registered public companies.

In a recent post, we looked at who audits public companies. In that analysis, we broke down auditor market share by five filer statuses, which allowed us to paint a clear picture of the stark differences between the competitive audit landscapes:

  • Large Accelerated Filers
  • Accelerated Filers
  • Non-Accelerated Filers
  • Smaller Reporting Companies
  • Non-Accelerated Filers + Smaller Reporting Company

However, in this analysis, we examine the audit competition for SEC registrants filing as a Non-Accelerated filer, a Smaller Reporting Company, or both.

In 2018, the SEC expanded the scope of Smaller Reporting Companies. During this expansion, the SEC adopted amendments that raised the thresholds in the definition of a Smaller Reporting Company. With these changes, the SEC intended “to promote capital formation and reduce compliance costs for smaller companies while maintaining appropriate investor protections.” As a result, companies were able to identify as a Smaller Reporting Company, or both a Smaller Reporting Company and either an Accelerated or Non-Accelerated filer. This increased the number of companies eligible for the scaled disclosure requirements afforded under the Smaller Reporting Company definition.

The infographic below offers a visual representation of the audit firms competing for market share among Non-Accelerated filers and/or Smaller Reporting Companies. Together, the top 20 firms audit 2,040 of 3,317 total companies – or 61.5% – of all Non-Accelerated and/or Smaller Reporting Companies in 2020. These numbers show a higher concentration among the top 20 audit firms compared to one year ago. In 2019, the top 20 firms audited 55% of this population.

In contrast, there is a lot more variety among the audit firms that compete for a slice of the smaller public company market. Outside of the top 20 firms, 239 other auditors share the remaining 38.5% of this market, 87 of which audit just one Non-Accelerated and/or Smaller Reporting Company.

Who Audits Smaller Public  Companies

Looking at auditor rankings for 2020, the top four firms collectively audit a quarter of companies in the population. Marcum audits the largest share of this market, with 8.4%; EY audits 6.5%, while Withum and Deloitte have 5.8% and 5.1%, respectively.

Further emphasizing the diverse composition of this audit market, the Big Four collectively audit just 20% of companies identifying as a Non-Accelerated and/or Smaller Reporting Company, compared to 90.7% of Large Accelerated filers and 57.9% of Accelerated filers.

Meanwhile, smaller public companies have specific characteristics that necessitate different audit procedures compared to larger companies. Audits for smaller companies typically involve a more substantive approach. Generally, for smaller company audits, there is a specific focus on the distinct risks associated with smaller companies. These characteristics, and the vast pool of companies, provide more room for competition in the audit market.

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