PwC global revenues grew 7% globally in local currency (or 10% in USD) to $41.3bn for the year ending 30 June 2018.
This puts the Big Four firm at just under $2bn behind Deloitte at the top of the Big Four, but still $6.5bn ahead of EY. KPMG was still to still to release its 2018 figures at the time of writing.
Growth came from across all markets, with Asian revenue growing the fastest – up 15.1% to $5,675m. The smaller Central and Eastern European, and Middle East and African markets also posted double digit growth in local currency.
The Americas, PwC’s largest market grew by 4.2% to $17,454m, while Western Europe achieved a growth rate of 6.4 to $13,864m.
Headcount grew by a similar amount (6%), to over 250,000 people, with the highest growth by percentage again coming from Asia and then Central and Eastern Europe.
PwC therefore joined its Big Four brethren by posting good growth across the globe, both in terms of revenue and headcount.
However the year has not been without its challenges. One such challenge has been in the UK, where the Competition Markets Authority (CMA) has been under pressure from both the press and the government to look into the audit market. Such a review could see some drastic actions taken against the Big Four’s dominance.
PwC global chairman Bob Moritz told The International Accounting Bulletin that some of the press reports have simplified the challenges the industry faces when it comes to quality.
Despite investing what was described as a ‘record amount’ in improving audit quality, Moritz admitted PwC’s 5-6% non-compliance rate meant it was ‘doing things well but not well enough.’ This was an improvement on 2017s figure, however.
One source of frustration for practitioners is the so called expectation gap between what a firm can provide and what it is expected to provide.
A lack of competition has been a sticking point in the industry for some time, and with three of the Big Four posting extremely healthy results for the year, the mid-tier have their work cut out for them to catch up.
Mandatory audit rotation was supposed to help in this regard. More recently some have begun to call for the Big Four to be broken up. Moritz says the challenge is more complicated than the press make it seem: “Here the challenge is: do organisations have the necessary scale and expertise to be credible. And the second is: is there a bias towards the Big Four because of the long history. Obviously the CMA in the UK is looking at the options of how to deal with that.
“I want to be clear that the headline news of splitting up the firms does not solve the problem of quality or expectation gap.”
He adds that, in a world where mandatory audit rotation is a fact of life in many large jurisdictions, splitting up the Big Four would add volatility to the market, rather than improve quality: “A firm may for a number of years win a number of audits and in other years lose and rotate out. So the question is do they have sustainability of investment for purposes of quality.
“The diversification of our revenue stream and our investment pool actually helps enable sustained investment for quality. If it was an audit only firm in some countries, we would have lot more volatility with the people we hire and the amount of revenues and therefore the amount of investment we would have available to continually invest. And would we be really skilled at the time when it turns back and we win more work?”
The past year has seen PwC make a number of heavy investments into technology as well as in legal services – for example opening a legal practise in the US for non-US legal issues.
Moritz sees the development of legal practises as a natural extension of the services PwC already offers, which is becoming more and more important as clients look further afield to fill skills shortages at the same time as countries raise the barrier for immigration.
“It is not a pure legal play. Legal is more important to the broader issues that organisations have to deal with. Taxation is an element of that. And that is why it is important to bring the full breadth and capability to these organisations.”
This all comes as part of what Moritz describes as a repositioning of PwC’s portfolio. This has seen the firm sell off a few businesses as well as make several acquisitions and form a number of partnerships.
Moritz noted: “Particular in that investment area, as you see in quality and technology. You saw the headline news in terms of well over $1bn in that space. We have spent a tremendous amount of time and money and energy to get our people upskilled on the technology agenda, leverage technology in our infrastructure, leverage technology in the service offerings we provide.
“That is really important as we think about our business and the relevancy and the value to it in terms of the marketplace.”