External Audit Services

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Category Alerts


FRC investigates KPMG over the audits of Carr's Group

April 20, 2023
alert level: Low

PCAOB to prioritize audit risk related to crypto and finance services sector

April 18, 2023
alert level: Low

Small accountancy firms seek help from Big 4 firms and urge them to share expertise

April 17, 2023
alert level: Low

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External Audit Services Industry Benchmarks

Savings Achieved

(in %)

The average annual savings achieved in External Audit Services category is 10.00%

Payment Terms

(in days)

The industry average payment terms in External Audit Services category for the current quarter is 66.0 days

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    External Audit Services market report transcript

    External Audit Services Global Market Outlook

    • The demand for external audit services increased by 5 percent in 2022, due to economic uncertainty caused by COVID-19, growing rigorous government policies/regulations, and surge in acquisitions

    • The M&A activity is expected to rise in 2023, as there is an increase in business optimism. This will increase the scope of external audit. The scope of External Auditor has also expanded, amid the emergence of new requirements, such as reporting ESG practices

    • Thus, the external audit services market is expected to grow at 5 percent to reach $115 billion in 2023

    Global External Audit Services Market: Drivers and Constraints

    • Audit services are a dependable source of revenue for most of the accounting firms, as these services are required by law. Consequently, the audit industry is expected to retain its steady growth. The pandemic has increased the dependency on audit firms, as financial reporting has become more complicated.


    • Legal requirement: Statutory audit is a mandatory legal requirement for all publicly traded companies by market regulators across all countries.

    • Regulatory reforms: Regulatory reforms and stringent policies increase the demand for quality audit.

    • COVID-19 has increased the dependency on audit firms, as financial reporting capturing all the implications of the pandemic is complicated.


    • Downward pressure on price: Commoditized nature of audit services exerts downward pressure on audit price.

    • Supplier Focus on NAS: Accounting firms are channeling relatively larger investments into consulting than traditional audit service line.

    • Talent Retention: Audit firms face challenges in hiring and retaining talent in senior roles compared to junior roles.

    Procurement Centric Five Forces Analysis: External Audit

    Corporate buyers, which have audit fee to revenue ratio ≥0.06 percent, have significant purchasing power, while procuring audit services, which would enable them to negotiate and get discounts from suppliers.

    Supplier Power:

    • Factors increasing supplier power: High auditor switching costs & dominance of Big Four Firms increase the supplier power

    • Factors that limit supplier power: Presence of alternatives, such as tier 2 and regional accounting firms, and commoditized nature of audit services limit the power of suppliers

    Barriers to New Entrants:

    • External audit is a highly regulated industry. Key entry barriers: capital investment, intense industry competition, existing buyer–supplier relationships, and experience/reputation of existing suppliers

    • Mandatory auditor rotation regulation and upcoming economic reforms in the developing economies are expected to reduce the entry barrier

    Intensity of Rivalry:

    • Intensity of rivalry is high, due to concentrated nature of the industry, commoditized nature of services, and two-third market share of Big Four Firms. Product differentiation via technology and client service can help the suppliers

    Threat of Substitutes:

    • Audit is a legal requirement for all public companies, government institutions, and privately owned companies by all jurisdictions (and regulators) around the world. Globally, there is no substitute available for external audit

    Buying Power:

    • Factors increasing buyer power: Buyer that have considerable audit spend and internal control procedures will have higher power, and hence, tend to get differential pricing (discounts) from the suppliers

    • Factors limiting buyer power: High auditor switching cost and Big Four brand benefit result in lower buyer power

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