• 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

    The UK: uncertain waves rule Britannia

    he UK’s accountancy profession is currently in a period of much uncertainty. The Competition and Markets Authority (CMA) has released its review into the listed audit market which could cause the biggest shake-up the profession has seen in years, the Kingman Review has described the Financial Reporting Council (FRC) as not being fit for purpose and called for it to be replaced. All the while the country remains in a deadlock on Brexit negotiations.

    read more

    Views from the Eurozone

    With Brexit looming, populist governments gaining footholds in a number of countries and movements such as the Yellow Jacket protests in France, 2018 was anything but a quite year for the eurozone. Here leaders report to the IAB on their markets.

    read more

    Eastern promise and how to find it

    With China rising as a global power, Jonathan Minter spoke with ShineWing’s Zhang Ke and Marco Carlei at the World Congress of Accountants 2018 in Sydney, to discuss the cultural challenges that occur when Chinese networks look beyond their border, and the dividends available for those who overcome them.

    read more

    Spain: looking to widen demand

    As Spanish accounting professionals prepare for new audit regulations, the Paul Golden asks what they need to do individually and at firm level to maintain and increase demand for their services.

    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.