As a publicly listed entity, every business is expected to have its accounts audited by statute. The audit is also expected to be done by an external Auditor and Auditors must be changed at least every 10 years to maintain the independence of the Auditors.
Based on information gathered on the financial statements of the companies on the NSE-30, it was obtained that these companies paid a total of N8.87 billion as Auditor’s remuneration in 2020. This value is however exclusive of Ecobank’s Auditor’s fee, while the Auditor’s Fee for the year ended 31st June 2020 of Flour Mills of Nigeria was considered.
Auditors of the NSE-30 Companies
A cursory look at the Auditors of the NSE-30 showed that their external audit was done among only 6 auditing firms: PWC, KPMG, Deloitte, EY, Grant Thornton, and Crowe.
PwC is a multinational professional services network of firms that provide a wide array of accounting and consulting services to its clientele. The firm ranks second largest professional services firm in the world which makes it one of the “Big Four.” Among the NSE-30 companies, PwC topped as the highest Auditor in terms of number of clients and received value.
In 2020 alone, PwC audited 9 out of the 30 companies and received a total auditor’s remuneration of N3.7 billion. The audited clients are Seplat, Guinness, Dangote Sugar, BUA Cement, Nascon, GTB, Access Bank, International Breweries and Zenith bank.
KPMG is another international professional services firm that is also a member of the “Big Four.” The firm followed PwC on the chart, auditing 7 companies in 2020. From all these companies, KMPG made a total of N2.7 billion.
The 7 clients are Flour Mills, Total, Lafarge, FBN Holdings, Unilever, Stanbic and Dangote Cement. KPMG was appointed as the external auditors of FBN Holdings in April 2020, replacing PWC that had served as the bank and the holdings auditors for 8 years and 10 years respectively.
Deloitte & Touche
Deloitte & Touche, formerly known as Akintola Williams Deloitte is Nigeria’s oldest indigenous accounting firm. By virtue of its relationship with the Deloitte global brand, the firm is also a member of the “Big Four.” For the 2020 financial year, Deloitte audited 6 companies at a total fee of N945.1 million as auditor’s remuneration. The firm also jointly audited Ecobank with Grant Thornton Auditors, however, the value of the auditor’s fee was not disclosed.
Specifically, the NSE-30 companies audited by Deloitte are Custodian, Presco, Transcorp, National Breweries, FCMB, Sterling Bank and Ecobank.
Ernst and Young (EY)
EY is another member of the “Big Four” that offers professional accounting and consulting services. The firm followed Deloitte in terms of number of clients on the NSE-30 but surpassed it based on the value of the auditor’s fee. In 2020, EY audited 5 companies on the NSE-30 and earned N1.5 billion as the total Auditor’s remuneration.
The audited companies are Union Bank, MTN, Nestle, Fidelity Bank and UBA.
Grant Thornton is the world’s seventh-largest firm by revenue among the professional services network of independent accounting and consulting firms in the world. The firm had only a sole client among the NSE-30 companies in 2020 which was Mobil from which it got a remuneration of N27.8 million.
It also acted as a joint external auditor to Ecobank with Deloitte, the value of this transaction was however undisclosed.
Crowe Horwath International
Crowe is an international public accounting, consulting and technology firm with offices across the globe. It is the 9th largest global accounting network in the world. Okomu Oil was the only audit client of Crowe in 2020 among the NSE-30 and the firm earned N30 million from the transaction.
NSE-30 companies that pay the highest Auditors’ fee
Various factors determine the amount an audited company should pay an external auditor such as time to be spent on audit, level of expertise needed, gross turnover of the company, total asset and even total operating expenditure.
|Stock||2020 Auditors Remuneration (N’m)||2020 Assets (N’bn)||2020 Revenue (N’bn)||2020 PAT (N’bn)|
|Guaranty Trust Bank*||1,179.9||4,944.7||281.0||201.4|
|Flour Mills of Nigeria*||470.7||432.5||573.8||11.4|
* Auditors remuneration includes non-audit services fee.
What this means
The auditing space is a large and highly competitive industry where in most cases, auditors are retained for the maximum statutory period of 10 years. Based on the size of companies and the calibre of previous auditors, companies are also constrained to not appoint lesser auditing firms which further limits the competitiveness of new entrants in the industry.
To therefore excel and grow in the market it is important for auditing firms to increase their visibility in the market and also start prospecting early enough to be in line as the next external auditor while still retaining and sustaining their independence.