• Register
Return to: Home > Comments > Editor's comment: Advice versus assurance

Editor's comment: Advice versus assurance

BearingPoint, EquaTerra, PTRM, Drivers Jonas, Übermind and Optimum Solutions are just some of the advisory businesses acquired by the four global accounting giants in recent years. To add to the list, PwC announced in October it is in discussions to acquire global consultancy Booz & Company, which would add around $1.4bn to the firm's annual advisory revenues.

Hopes of strong, maybe even double-digit organic growth appear to have been swept away with more pragmatic business views in recent years.

The Big Four appear to be more or less fearless of the effects advisory acquisitions might have on their business models despite, only a decade ago, the Sarbanes-Oxley regulation leading to a mass disposal of advisory capabilities of three of the Big Four firms. Since then, all firms have to some extent rebuilt their advisory capabilities or strengthened what was left of the old ones, but debates about whether to restrict the offering of non-audit services by audit firms are still very much active.

The EU is currently discussing such measures and potentially creating an additional 'blacklist of non-audit services' and several countries around the world have raised the issue and questioned the potential conflict of interest that could arise with providing advice to an audit client.

Despite such concerns, advisory has almost started to overtake assurance revenues in many Big Four firms. Globally, Deloitte is currently the only firm with higher advisory revenues than assurance, but in Australia, for example, PwC's and EY's assurance revenues only account for 31% and 35% of overall revenues respectively. The Big Four also vigorously argue that non-audit services and having a board skill set at the firm only strengthens the quality of audit and the standard of service they provide. ~

An increase in advisory investment at the Big Four is a likely response to the slowdown in growth, audit fee pressure and an increase in regulatory compliance, which seems to have halted audit services growth around the world.

The culture of 'more for less' has become the mantra in many countries and it appears firms are increasingly resorting to advisory work for those much-needed fees to support growth at their large international business. Advisory investments are deemed to be worth the risk for firm leaders as regulation in the market is far from decided.

Top Content

    Brazil: regulation and technology form basis for recovery

    Opportunities in the capital markets and the ever-growing influence of technology are expected to have a significant impact on the Brazilian accounting profession over the next 12 months, writes Paul Golden.

    read more

    Mentoring support and the opportunity to delegate

    Jon Lisby will be known to many from his former role as CEO of Kreston International. Here, he explains the background to his new venture, Global Alliance Advisory Services (GAAS), and how he aims to offer support to alliance CEOs.

    read more

    Global by name, global by nature

    Stephen Heathcote became chief executive officer of PrimeGlobal on 1 June 2019. Robin Amlôt met him to discuss the various new challenges that he has taken on, and his ambitions for the association.

    read more

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more

    CORONAVIRUS TIMELINE: REACTIONS FROM THE ACCOUNTANCY PROFESSION

    As the Coronavirus (COVID-19) continues to spread across the world, the International Accounting Bulletin and The Accountant will be collating all the latest news and updates from the profession on the pandemic’s impact.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.