June 17, 2021

Audit Firms for Smaller Companies: Shorter Average Tenure, Often Not the Big Four

When we blog about audit firms, it’s frequently about the Big Four, which tend to dominate audit firm market share for larger public companies. A recent Audit Analytics blog provides a look at audit firm market share for smaller companies.  For SEC filers with revenue between $10 million and $150 million, Audit Analytics found the Big Four audit less than a quarter of this small company market.

When it comes to audit firm tenure at smaller companies, the tenure is lower than what is found at mid- or large-cap companies. Audit Analytics found that smaller companies with revenue between $10 – $150 million have an average audit firm tenure just short of eight years, whereas large companies with revenue over $1 billion have an average audit firm tenure of almost 24 years. The blog notes there are reasons shorter tenure is commonly found with smaller companies. First, small companies are usually young companies, thus lowering the average tenure.  Also, smaller companies with less financial resources are more likely to shop around to lower their audit fees, while growing companies may change audit firms as their needs evolve.

– Lynn Jokela