US Financial Crisis Impacts Big Four Firm Audit Fees

The current financial crisis in the US has taken a big toll on some storied companies in the recent few months, with unimaginable consequences for the entire financial sector.

Consider this:
FannieMae (NYSE:FNM) and FreddieMac (NYSE:FRE) are now under US government conservatorship
Bear Stearns (NYSE:BSC) was purchased for a pittance by JP Morgan (NYSE:JPM)
Merrill Lynch (NYSE:MER) sold itself to Bank of America (NYSE:BAC)
Lehman Brothers went bankrupt recently (NYSE:LEH)

Till just a while ago, all these were public companies traded on the stock exchange and being regularly audited by none other than the Big Four firms. Now with the loss of these firms, the firms have lost big audit fees (at least as a first order impact), not counting any continuations of audit under US government conservatorship or their buying companies, or eventual work from these events.

From our quick analysis (we believe our numbers are right, but provide no guarantees), Deloitte appears to be the most negatively impacted.

Deloitte loses almost $130 million of audit, tax and advisory fees at 2007 levels due to the change of ownership of:
Merrill Lynch (2007 total fees: $57.1 million, 2006 total fees: $51.9 million)
Bear Stearns (2007 total fees: $20.8 million, 2006 total fees: $18.7 million)
FannieMae (2007 total fees: $49.3 million, 2006 total fees: $42.2 million)

Next comes PricewaterhouseCoopers with a loss of $73 million at 2007 levels due to the change of ownership of:
Freddie Mac (2007 total fees: $73.1 million, 2006 total fees: $46.1 million)

Next comes Ernst and Young with a loss of $30 million at 2007 levels due to the change of ownership of:
Lehman Brothers (2007 total fees: $30.1 million, 2006 total fees: $29.5 million)

Surprisingly, KPMG, which is reputedly strongest in financial services and known to have the largest client roster in this sector has been unaffected as yet.

Total Loss to Big Four Firms: $231 Million Dollars

Source: Big4.com