The global External Audit services market was estimated at USD 110 billion. It is expected to reach USD 114 billion by 2023 with year-on-year growth rate of 5%. Key factors influencing market growth include emerging regulatory issues and standards, Legal requirement, and huge challenge of capturing financial impact of COVID-19 on assets/liabilities.
External Auditing services Market Outlook
Demand for External audit services across all the regions is expected to increase in 2022. The current complex business environment has increased the demand for external audit services, as companies are witnessing financial reporting challenges and governments/regulatory authorities are enforcing stringent policies.
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The external audit services are witnessing heightened demand, due to rigorous regulatory policies, increasing financial complexities, and a significant increase in mergers & acquisitions.
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The scope of external audit services is expanding to include services, like risk management, ESG reporting, etc.
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The measures by regulators have helped to break Big Four monopoly to a smaller extend. Companies have started engaging with Non-Big Four Firms
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The billing rates are expected to grow by 5-8 percent in 2023, due to a rapid rise in demand for External Audit services
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Audit firms plan to train existing auditors on emerging areas and technologies, hire more skilled auditors and outsource/co-source auditors to deal with audit staff shortage
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heightened focus on crypto-currency and ESG assurance in the last couple of years might increase the dependency on auditors.
COVID-19, Russia-Ukraine Crisis, and Economic Headwinds Impact on External Auditing Services
Financial reporting is significantly impacted by COVID-19, as auditors and companies are presented with the huge challenge of capturing its potential financial impact on assets and liabilities, and the need of necessary disclosures to stakeholders. Due to the additional manpower requirement and increased investment in technology, accounting firms are quoting higher fees to their clients.
External audit services Pricing Insights
Accounting firms typically quote rack rates/pre-discounted rates to the clients, which are further discounted. The final rates obtained by the client depend on the buyer’s negotiating power, project duration, size of the client etc. Due to higher demand, inflationary pressures, and a surge in labor cost, the prices are expected to increase by 5-8 percent in 2023. Also accounting firms are investing in advanced technology to perform audits and to collect audit evidence, resulting in increase in billing rates.
External audit services Supply Outlook
Audit firms plan to train existing auditors on emerging areas and technologies, hire more skilled auditors and outsource/co-source auditors to deal with audit staff shortage.
They are attempting to improve the efficiency of workflows, with most firms completing the entire process- from initial client engagement through invoicing- in less than a month.
Regional Market Insights
North America and Europe are the most mature markets and contributes to more than 70 percent of the global external audit services revenue. Suppliers have strong service capabilities and wide geographical presence. Audit firms are transforming into technology houses, which indicates high supplier maturity.
Supplier Intelligence
The category intelligence provides insights on key global and regional players such as Deloitte, EY, PWC, and KPMG among others.
Big Four firms (Deloitte, PwC, Ernst, and Young and KPMG) are the preferred choice for audit services by Fortune 500 and other publicly listed companies. The top & mid-tier suppliers are either independent professional service firm or accounting networks having a global presence.
Big Four accounting firms audit 47 percent of the SEC companies, 100 percent of the fortune 500 companies, and 99 percent of the S&P 500 companies.
