Advisory services have increased their share of revenues. In 2004, they had 22% of total revenues and this had sharply increased to 31% in 2011.
New York, NY (PRWEB) February 01, 2012
Big4.com's recent insightful analysis of the distribution of revenues across the three key service lines – Audit, Tax and Advisory - for the Big Four accounting firms shows variation both in terms of structure and growth from 2004 to 2011. This analysis critically examines the reported revenues on a global basis to determine annual growth rates and contributions to worldwide member firm revenues on a common basis across the firms.
REVENUE BY SERVICE LINE
The Big Four firms offer a wide variety of professional and financial services, with newer Advisory services adding to their more traditional and deep-rooted Audit (Assurance) and Tax Services. Firms vary in their structure and definition of these broad service lines, typically though about half the revenues are sourced from Audit, and the balance is shared between Tax and Advisory Services.
The Advisory service line, forms the last quarter of the Big Four firm revenue and includes the broader non-Audit and non-Tax services such as Transaction Advisory, Risk Management, and Business Consulting services; and demarcations generally vary across the firms. Owing to this catch-all nature of this category, there are many drivers of top line results, merger and acquisition activity and general business growth being principal factors.
Advisory services have been one of the fastest growers in the Big Four firms as the firms extend their services beyond assurance and taxation through penetration into current clients or through referrals from other firms who may be conflicted out at their clients. Advisory services have generally increased their share of revenues. In 2004, they had 22% of total revenues and this had sharply increased to 31% in 2011, at the expense of declines in Audit and Tax.
Despite this sharp growth, Advisory services had the sharpest decline of 9% from 2008 to 2009, as clients slowed down transaction and restructuring activities all over the world. But Advisory had the sharpest bounce back among service lines, with revenues up 6% from 2009 to 2010, as equity markets roared back, M&A increased and client demand for consulting grew proportionately. Deloitte’s Advisory revenues grew a remarkable 12%, KPMG was up 8% and E&Y and PwC also grew but at more modest rates.
In 2011, the growth story became even stronger. Combined Advisory revenues of $27.8 billion in 2010 jumped 15.9% to $32.2 billion in 2011, the first time ever to cross the $30 billion threshold. PwC Advisory grew the strongest at 20.2%, while Ernst & Young grew the slowest at a very respectable 14.2%.
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