PriceWaterhouseCoopers Limited country leader Kuria Muchiru (right) and his Partner for Public Sector Group leader Alphan Njeru during the presentation of the Budget analysis on June 9 2011. PriceWaterhouseCoopers (PwC), Deloitte, Ernst & Young and KPMG are increasing fees to cover the rising cost of doing business that has been worsened by the complexity of auditing due to the change in rules. File
Fat accountants’ salaries and the cost of complying with new standards has forced firms looking at the books of publicly traded companies to raise audit fees by 12.3 per cent.
Executives from the ‘Big Four’ accounting firms say salaries in the profession have more than doubled over the past five years as increased poaching of top talent push the financial advisory companies to up their wages in an attempt to retain key staff.
As a result, PriceWaterhouseCoopers (PwC), Deloitte, Ernst & Young and KPMG are increasing fees to cover the rising cost of doing business that has been worsened by the complexity of auditing due to the change in rules.
Data from the annual reports of firms listed at the Nairobi Stock Exchange (NSE) indicate that they last year spent Sh390.9 million on auditing up from Sh348 million in 2009, reflecting 12.3 per cent increase and auditors say the increments will also reflect this year.
Senior accountant’s pay
“The increase in fees is a reflection of the rise in wages in the auditing field in recent years due to the scramble for top talent and I expect it to maintain the same gradient this year,” said Sammy Onyango, the managing partner at Deloitte.
“The effects of the revision of accounting rules has also increased workload and this accounts for about 30 per cent of the additional fees,” he said.
The pay of a senior auditor has risen to an average of Sh240,000 from about Sh150,000 in a period of three years.
The rise in audit fees is expected to lift the earnings of the accounting firms, notably the Big Four who control nearly 85 per cent of the market, as the players emerge from a business environment that had kept fees nearly stagnant in the three years to 2010. Auditing fees account for between 50 and 70 per cent of the auditors’ earnings with the remaining share being taken by consulting, tax and financial advisory.
The flat fees had been attributed to a bitter pricing war among the top firms as they race to snap up top corporate clients until the ballooning wage bill forced the firms to change tact.
“The rise could have been higher were it not for the competition, especially blue chip listed firms,” says Ashif Kassam, the managing partner at RSM Ashvir.
The competition, however, has not changed the market structure with the four top firms maintaining a stranglehold of the auditing contracts and their market shares based on fees from NSE listed firms—which is a proxy measure of industry trends-has also remained the same in recent years.
All of the 45 listed firms in NSE’s main market were handled by the big four except for Marshalls, Olympia and Eveready that were audited by PKF Kenya and BDO. Fees from the publicly traded firms place PwC’s marketshare at 43 per cent or Sh165.5 million, Deloitte (26 per cent or Sh98.6 million), Ernst & Young (15 per cent or Sh59.4 million) and KPMG (14 per cent or Sh54.5 million).
PwC benefited from its heavy representation among multinational firms such as CFC Stanbic and Barclays Bank of Kenya as it has 10 clients among the NSE listed firms compared to Deloitte’s 17. The surge in salaries comes at a time when human capital is emerging as the most sought-after resource and an arsenal for market share growth.
The need for top-notch skills is informed by the growing sophistication of auditing, accounting reporting and advisory deals.
