Non-Big Four firms grow PIE audit share, FRC finds

Non-Big Four audit firms carried out 40% of public interest entity (PIE) audits in 2024, according to the Financial Reporting Council’s latest Audit Market and Competition update. This was up 1% from 2023, and almost double the 22% share reported in 2020. That includes 13% of FTSE 350 audit engagements, which were “relatively stable” compared with the rest of the market.

The regulator said the UK audit market continues to diversify, although the Big Four still dominate overall PIE audit volumes. 

The report also noted improvements in audit quality in recent years, driven by investment in staff and quality management systems. Nonetheless it said a quality gap remains between the largest firms and the rest of the market.

The FRC said its Audit Firm Scalebox is designed to support smaller firms as they expand into PIE work, including through a dedicated systems of quality management workstream. It also highlighted its Building Capacity for Smaller Firms programme, which aims to help firms develop a presence in the PIE audit market.

Beyond Scalebox initiatives, the regulator outlined measures to promote a more competitive market. These include efforts to improve audit quality, remove barriers to growth for smaller firms, widen access to audit services and create more proportionate regulation.

It highlighted a collaboration with professional bodies on modernising audit qualifications through the Audit Qualification 2030 project, which launched in September. 

Amendments to the Stewardship Code and Corporate Governance Code were cited as further steps intended to deliver clear and proportionate reporting requirements.

The ICAEW welcomed the findings, and said: “Audit market competition and resilience are very important aims, and we very much welcome the greater competition in PIE audit that the FRC report describes, but audit quality should continue to be seen as paramount. 

“We encourage the FRC to redouble its efforts to understand the different ways in which audit quality can be enhanced in firms of different sizes, to more effectively address issues in firms that have not made the grade.”

FRC CEO Richard Moriarty added: “A well-functioning audit market is essential for maintaining confidence in UK plc and enabling businesses to attract the capital they need to grow. While we’ve seen encouraging progress, with non-Big Four firms now conducting 40% of PIE audits, achieving a resilient audit market requires collective action from all stakeholders – audit firms, companies, and regulators alike. 

“The FRC is committed to working collaboratively to embed proportionality, reduce unnecessary burdens, and build capacity across the whole market.”