Its latest findings reveal a “positive” market shift ahead of operational separation by 2024, reflecting the application of a non-audit services fee cap for public interest entities for the first time.
The FRC’s 2020 Key Facts and Trends in the Accountancy Profession (KFAT) also found that fees for audit work at the largest UK companies increased in 2019 as audit quality improvements “continued to be a major focus” for the firms.
Big Four firms continued to see an increase in their total fee income, which was up by 7.1% in the year. Firms outside the Big Four saw a smaller decline in total fee income in 2018/19, with a decline of 0.1% compared to 8.1% in 2017/18.
It comes as the Big Four continued to audit all of the FTSE 100 in 2019. However, the two largest firms outside the Big Four audited 10 FTSE 250 companies, increasing their share of the FTSE 250 market from 3.2% in 2017 to 4.8% in 2019.
The latest FRC data also revealed that the number of audit firms registered with the Recognised Supervisory Bodies (RSBs) continues to decline, down to 5,127 as at 31 December 2019, compared to 5,394 in 2018 and 5,660 in 2017.
The FRC’s executive director of supervision, David Rule, said: “The latest data across the firms reveals some welcome market developments as the FRC continues to drive audit quality improvements.
“New ethical standards introduced by the FRC have also sought to reduce possible conflicts of interests between audit and non-audit work.”
He added: “Improving choice and resilience in the market also remains a major focus ahead of wider government reform and planned operational separation of the audit practices of the Big Four.”