Midsized US accounting firms retreat from public company audits

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A number of midsize US accounting firms pulled back from auditing public companies in 2023, as a shortage of new recruits and a tougher regulatory environment prompted a rethink of the business.

The withdrawals left some small companies scrambling to find a new auditor ahead of the end of the financial year, and an accounting industry group said other firms could follow suit in 2024 as the Public Company Accounting Oversight Board steps up inspections of the trickiest audits.

Eide Bailly, a top-20 accounting firm based in North Dakota, told its five regional banking clients in November that it was pulling out of auditing listed financial services companies, according to regulatory filings.

Its move came after CliftonLarsonAllen, another top-20 firm, wound down the last of its public company audit work, which had focused on banking clients, earlier in 2023.

Jen Leary, CLA chief executive, said that the substantial investment required to serve public company clients, including building appropriate risk management infrastructure, was better spent serving small and midsize private companies and non-profits. “That’s our A-game,” she told the Financial Times.

The PCAOB, which oversees public company audits, has taken a more active approach to enforcing audit standards under the Biden administration, increasing the numbers of inspections it carries out and levying record fines on accounting firms.

Last week, the regulator said it would carry out more inspections in 2024, with a focus on banks, given the turmoil caused by rising interest rates. It is also in the middle of a rewrite of audit standards, with a view to tightening protections for investors.

Audit firms “are challenged to get people to want to do the work”, said Sue Coffey, chief executive for public accounting at the American Institute of Certified Public Accountants, which represents the…