Over the next three years, prices are forecast to move against buyers; buyers are advised to purchase services sooner rather than later and lock in prices with a multiyear contract
Los Angeles, CA (PRWEB) January 26, 2014
Audit services have a buyer power score of 2.9 out of 5. This score reflects recent positive pricing trends that allow a buyer to negotiate from historically low prices. “Supplier margins, although still healthy, are much lower than before the recession, indicating a supplier's willingness to be flexible in tough times,” says IBISWorld procurement analyst Caitlin Newsom. Higher profit is most common at the largest firms, which include KPMG, Ernst & Young, PricewaterhouseCoopers and Deloitte & Touche. IBISWorld considers prices to be near the bottom and estimates that input costs are starting to rise and external demand drivers are helping push pricing power back toward suppliers.
The benchmark market price for audit services is expected to increase over the next three years; the service is mandatory for most buyers and the cost of switching suppliers is high. All of these characteristics ultimately limit a buyer's negotiating power. “Buyers should seek multiyear deals to improve service pricing,” adds Newsom. “Longer-term engagements may also have the added benefit of improving audit quality over the term of the agreement.” Additionally, by entering into a multiyear contract, a buyer will be able to lock in the current audit prices and avoid the expected increase in prices over the three years to 2016.
Some product characteristics are also not conducive to buyer power. Audit services have a long purchase cycle, often involving an audit committee that is outside of the procurement department's scope. There are also high risks with selecting the wrong provider, and in certain high-pressure scenarios - mergers and acquisitions (M&As) or initial public offerings (IPOs) - buyers tend to go with the market's dominant companies and pay higher prices for the associated credibility. Finally, measuring service quality is difficult and so a poor audit may not be apparent until it is too late. Fortunately, best practice suggests that audit providers are retained for about five years, which means buyers do not have to repeat this process very often. For more information, visit IBISWorld’s Audit Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of audit services. Audit service providers are accountants certified to review the accounting records of public and private organizations and to attest to compliance with generally accepted accounting practices. Auditors are generally part of offices of certified public accountants (CPAs) and provide auditing financial statements and advice on matters related to accounting. Auditors are expected to be entirely independent of the companies or organizations they audit. They should present an unbiased and skeptical evaluation of the audited company’s financial condition and statements for shareholders and other interested parties. This report does not include tax accounting services.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.