No room for a fifth? The Big Four’s iron grip on STI audits

[SINGAPORE] Thirty listed companies comprise The Straits Times Index (STI). But when those companies choose an auditor, the field narrows to just four names.

Every current constituent appoints either PwC, KPMG, EY or Deloitte. Not one uses a mid-sized firm, generally referring to businesses with fewer than 1,000 employees.

This is despite the fact that mid-sized firms, such as Baker Tilly, BDO and RSM Singapore, do audit other listed companies and compete for initial public offering (IPO) work.

In FY2025, KPMG held the most STI mandates at 13, followed by PwC with 11. Deloitte audits four constituents, while EY audits two.

By value, however, PwC led by a wide margin. Its STI clients disclosed S$81.1 million in audit fees attributable to PwC and its network firms, equivalent to 53.7 per cent of the FY2025 fee pool.

This distribution is also skewed by big clients. In FY2025, the five largest single audit bills made up almost half of the S$151.1 million total.

Jardine Matheson disclosed S$27.4 million, followed by OCBC at S$16 million, Wilmar International at S$12 million, DBS at S$11 million and UOB at S$8 million.

What allows the Big Four to have such an iron hold on the STI, and is there any chance for this to be broken?

Chester Leong, corporate adviser at Apexia Corporate Advisory, believes it will be “many years” before the latter is possible.

“Right now, if you suddenly switch from a Big Four (auditor) to a mid-tier firm, shareholders will not be happy,” he says. “The perception is that the audit quality may go down.”

Fee advantage?

One possible advantage that mid-tier firms might be assumed to have is that of price.

While fee structures differ by engagement, industry players estimate that a mid-tier firm may charge 30 to 50 per cent less than a Big Four firm for a comparable listed-company audit, on a like-for-like basis.

The discount reflects differences in overheads, brand premium and operating models, rather than materially different audit standards, says Leong.

The Business Times looked at annual report disclosures of all STI constituents over the last five financial years. Across these 150 company-year observations, there were just six changes of auditor.

Five of these changes do coincide with a lower fee in the new auditor’s first year, with a median reduction of 8.4 per cent.

However, industry players caution against concluding that companies switch simply to save money.

Leong says tenders for new auditors are often prompted by broader concerns such as service quality, staffing constraints or delays. Once a tender is actually held, however, price becomes one way for a challenger to dislodge the incumbent.

Mak Yuen Teen, professor (practice) of accounting and director of the Centre for Investor Protection at NUS Business School, says a firm may quote a lower initial fee to secure an attractive client, before raising it gradually in subsequent years.

“There is some risk of aggressive pricing or ‘lowballing’, although hopefully for such large companies, audit committees would not recommend audit firms mostly on the basis of price,” he says.

Offering a lower fee does not always amount to lowballing, notes Terence Lam, director of professional standards and advocacy at the Institute of Singapore Chartered Accountants (Isca).

Rather, audit firms may have different staffing structures, technology or delivery models, or have identified genuine efficiencies.

The price must nevertheless support the work required, particularly in the first year, when the incoming auditor faces a heavier transition burden, he says.

“Any lower fee must still support sufficient audit hours, experienced personnel, partner oversight and specialist resources.”

Not worth the savings

Industry players say that even where a mid-tier firm may be capable of doing the work, the potential savings are often too small to offset the perceived risk of moving away from a familiar name.

The STI constituents’ combined FY2025 audit bill of S$151.1 million was less than 0.05 per cent of their combined revenue or total income, which exceeded S$300 billion.

For a large company, a lower audit fee may therefore be of little significance compared with the reputational consequences if the auditor appointment is later questioned, says Bernard Lee, founder and senior partner of Audit Alliance.

He likens the choice to the old corporate maxim about buying IBM computers: the dominant provider may cost more, but the person making the decision is less likely to be blamed if something goes wrong.

Robson Lee, a partner at Kennedys Law, says appointing a new auditor merely because its fee is lower than the incumbent’s “would be a fallacious decision”.

But he sees no inherent governance risk in using a mid-tier firm, “so long as the audit work is able to withstand professional scrutiny and satisfy the accounting regulator’s requirements”.

The risk of being questioned about the choice of auditor may come down to perceptions.

“The low turnover of auditors is probably more attributable to the fact that large companies prefer the ‘safety’ of a Big Four audit firm,” says Stefanie Yuen Thio, joint managing partner at TSMP Law.

“They have international networks which make audit and consolidation of foreign subsidiaries more convenient, and a chief financial officer is less likely to be questioned for picking a brand name audit firm.”

If anything, audit fees have been rising, although this has broadly followed growth.

The constituents’ combined audit bill in FY2025 was 20.7 per cent higher than in FY2021, broadly matching the 20.4 per cent growth in combined revenue or total income in the same period.

The median rise in audit fees was 22.3 per cent over the entire period. But the sharpest yearly increases came earlier, peaking at 12 per cent in FY2022.

Lam says the increase in 2022 may reflect some catch-up after Covid-19, while Leong reckons acute staffing shortages during the pandemic drove unusually steep fee increases for some clients.

More recently, the Big Four have shifted parts of their audit work to regional centres in markets such as Malaysia and the Philippines to contain costs. This may help explain the moderation in audit fee increases in the past two years, Leong says.

When continuity becomes familiarity

While the Big Four’s dominance in STI audits may not have pushed up fees, this concentration has implications beyond competition, industry players say.

One of these is a corporate governance debate over audit firms having long tenures.

Granted, there are clear operational reasons for sticking with one auditor. A new auditor has to learn the company’s operations, systems, subsidiaries and accounting policies; in turn, management must devote time to onboarding the firm.

Continuity matters because bringing in a new firm is “disruptive and time consuming”, says Yuen Thio, who has served on audit committees responsible for appointing listed companies’ auditors.

Industry players differ, however, on whether a long relationship may weaken an auditor’s independence or professional scepticism.

Prof Mak sees this as a real risk, which may not be adequately addressed by simply rotating the lead partner while retaining the firm.

“(The) long tenure of audit firms is a concern to me,” he says. “I do not see mandatory rotation of audit partners as a solution to loss of independence or professional scepticism – it is unlikely a new partner will disagree with the previous partner from the same firm.”

He believes the Singapore Exchange should require companies to disclose when their current auditor was first appointed and how long it has served.

The professor also supports making it mandatory for companies to re-tender for an auditor after a prescribed period – and, eventually, putting a cap on audit firm tenure.

“I went to an annual general meeting recently and I think the audit firm has been the auditor for that company since the audit and risk committee chair and I were in diapers – it was probably that long,” he quips. “That cannot be healthy.”

Others argue that continuity can improve audits, as the firm will have a deeper understanding of the company and its risks.

Continuity can deepen an auditor’s knowledge of a company’s business, systems and risks, says Lam: “Familiarity should sharpen the audit, not soften the challenge.”

Partner rotation, independent reviews and restrictions on non-audit services remain important safeguards, although their effectiveness depends on how rigorously they are applied, he adds.

Leong has not seen evidence that long firm tenure alone damages audit quality.

Staff turnover within audit firms means that few members of an engagement team remain with a client for an extended period. Lead partners also rotate, and other partners typically review the work, he notes.

Meanwhile, the firm retains institutional knowledge, including audit methodologies, prior-year working papers and experience accumulated over successive audits.

The Big Four edge

Industry players stress that mid-tier firms are very much capable of listed-company work.

Many already audit listed businesses. Such firms are also involved in three of the seven Singapore Exchange IPOs so far in 2026, Lam points out.

“Greater choice – that is, a broader pool of firms that are able to compete effectively – would strengthen the resilience of the audit market, but choice must be built on capability, not compromise,” he adds.

But STI constituents are not ordinary listed companies. They tend to be large regional groups – and auditing these is a complex task, say industry players.

The auditor’s core team may need support from specialists in valuation, information technology or fraud management.

Says Isca’s Lam: “The Big Four benefit from having extensive international networks, established technology platforms and deep benches of sector and technical specialists.”

The Big Four can spread the cost of such capabilities across thousands of employees and international member firms, while drawing on shared audit platforms, centralised training and in-house software.

For mid-sized partnerships, the economics are far more difficult, says Audit Alliance’s Lee. They must hire scarce specialists, invest in technology and training, and absorb the regulatory, insurance and reputational risks of auditing a large public company.

Expansion is often funded from a partnership’s accumulated earnings, and a mid-sized firm may not have enough to build all these capabilities at once, he adds.

International reach creates another hurdle. Many STI constituents operate across several markets, which means the parent company’s auditor must coordinate overseas component auditors, review their work and apply a consistent methodology across the group.

“A larger company like CapitaLand or Singtel has a major regional footprint,” Lee says. “Your (Big Four) network will have an advantage.”

The capability gap is compounded by a shortage of talent, says Apexia’s Leong.

Many partners with experience auditing listed companies remain concentrated in the Big Four, whose pay, training infrastructure and career prospects are hard for smaller firms to match.

Together, these constraints create a chicken-and-egg problem: mid-tier firms need major mandates to build scale, experience and credibility, but struggle to win those.

However, Prof Mak argues that while some STI constituents genuinely require the Big Four’s specialist depth and international reach, others may well be able to appoint the fifth or sixth largest audit firms.

At times, the weight placed on a Big Four brand might exceed the company’s actual requirements, he notes.

Lam agrees that the Big Four benefit from being established brands: “Brand familiarity among boards, investors and lenders may also reinforce their position.”

To break into the benchmark index, mid-tier firms do not just have to match the Big Four’s talent, technology and international reach. They must also persuade boards that a fifth name presents a credible alternative, rather than an added risk.