External Audit Services Market Trends
Category Intelligence on External Audit Services covers the following
- Information relating to market, supply, cost, and pricing analysis
- Hard to find data on cost and TCO models, supplier details, and performance benchmarks
- Macroeconomic and regional trends impacting cost, supply, and other market dynamics
- Category-specific negotiation and sourcing advice
Industry Outlook & Drivers
In 2019, the global external audit services industry was valued approx. $96 billion, and it is expected to grow at approx. 4–5 percentto reach
$100 billion in 2020.
Market Drivers and Constraints
• Statutory audit is a mandatory requirement worldwide
• Emerging regulatory issues and standards are driving demand for high quality audit
• Supplier focus on non-audit services
• Commoditized nature of audit services
• Talent retention
- Factors responsible for high supplier power: High auditor switching costs* and absence of substitutes in the industry. Big Four command greater bargaining power owing their greater market share
- *Note: Auditor switching costs are usually 20–50 percent of the annual audit fee.
- Factors limiting supplier power: Mature buyer organizations, presence of tier II firms and commoditized nature of services.
Barriers to New Entrants:
- Barriers to entry: Highly regulated industry. Key entry barriers: capital investment*, intense industry competition, existing buyer–supplier relationships, and experience/reputation of existing suppliers
- *Note: Capital investment on labor and technology
- Enablers for new entrants: Mandatory auditor rotation regulation and upcoming economic reforms in the developing economies
Intensity of Rivalry:
- High Industry 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
- Forces acting against intense competition: high auditor switching costs; product differentiation via technology and client service
Threat of Substitutes:
- Mandatory legal requirement: 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
- Factors responsible for sufficient buyer power: Mature buyers having considerable audit spend, well-defined quality/service parameters and internal control procedures. Presence of tier II firms also increases buyer power
- Factors limiting buyer power: High auditor switching costs and Big Four audit firms service quality.