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For the first time ever the Russian Ministry of Finance has published key figures on Russia’s audit market in 2006. The highly anticipated report does not contain any big surprises for most players in the market, but some of the figures might appear rather unexpected. Vladislav Yermizin at Russian audit firm MSI FDP Aval reports.
According to the Ministry’s figures, audit firm revenues have grown steadily over the last few years, reaching US$1.312 billion in 2006 (64% higher than in 2004). There are around 7,100 licensed audit firms in Russia. About 40% of firms are located in Moscow, 8% in St. Petersburg, and 52% in other regions. And while firms from Moscow and St. Petersburg tend to derive only about 40% of their revenues from audit services, with the rest coming from accounting, consulting and other professional services), regional firms appear to be more focused on audit which brings them nearly 60% of their revenues.
Almost 70% of the firms have been active in the market for over five years, while fewer than 200 were granted a license in 2006.
Auditors inspected over 72,000 client companies in 2006. 57% of them were granted a positive auditor opinion, while 1.1% received a negative opinion, and in about 300 cases auditors declined to issue an opinion.
The average firm, excluding the Big Four, employs 15 people (the figure is over 1,000 for Big Four), about half of whom are auditors (only about 10% for the Big Four), and serves 17-20 clients (versus 196 for the Big Four).
Revenues vary markedly – while Big Four firms average US$100 million per year, yielding revenues of about US$200,000 per auditor, the average Moscow audit firm has revenues of US$412,000 or $24,300 per auditor, and the average regional firm (excluding Moscow and St. Petersburg) only takes about US$128,000, or US$10,000 per auditor per year.
Whilst the numbers are interesting if somewhat predictable, the real sensation comes with the figures illustrating audit firms’ market share. Previously it was believed that Big Four firms have about 70% of the audit market in Russia, their actual share is actually only 31% of all revenues (and only 24.1% of audit services revenues), while Top 50 companies (including the Big Four) together account for a 55.7% share of revenues, with 47.3% from audit services.
So as the numbers show, the influence of the Big Four in Russia, whilst still significant, was hugely overrated by most previous researchers and experts!
For more information
Please contact Vladislav Yermizin at Russian audit firm MSI FDP Aval.
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