Challenges for Audit firms below the Big 4

Now that the upper end of the auditing market has been clearly established by the Big 4 with more than 80% of the market volume, the question is currently who among the following, approximately 10 companies in Germany, will be able to keep up. Even with the question of the ability to carry out 319a HGB audits, it is becoming increasingly difficult for these companies to keep up economically with their comprehensive audit approach. Added to this is the often insufficient capacity in related issues, be it pricing, VAT or transactions.

We expect that only about 6 of Next10 will survive this competition. The ability of the companies to act is therefore central to their success, and since most of them are organised more as partners, it is important to take all partners along with us in this change towards a more competitive society.

The partners must be able to translate the usually widespread knowledge into action. To this end, fundamental questions of participation, decision-making and implementation must be answered. This is because the purely partner-centred business model of these companies must be complemented by a governance model that can make forward-looking, and thus risky, decisions, as opposed to purely operational decisions.

As consultants we have the ability to change entire systems. That is why we are in a position to manage the change that is necessary with auditing companies organised as partners. Our systemic approach, coupled with strong project management, leads to a focus on the central questions of willingness to change, and through moderation we succeed in getting our partners to reach a consensus.

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Market shares of the WP companies on the auditing market

Market share of audit firms by segment

The Next10 law firms are in intense competition with the Big4, who not only get dangerous with rotation clients, but increasingly try to attract large mid-sized companies by offering better consulting services.

We can name the following cases from the last 20 years of our law firm consulting, with many examples overlapping; at the core, it is always about culture change:

  • Support in the merger process of a leading Next 10 firm with its international network; facilitation of practice group meetings, voting and decision in the partnership on the process
  • Practice group launch: an internationally active MDP firm would like to form a practice group to complement the existing service lines. For this purpose, this offering was defined, the competencies for this were aligned (competency management) and finally the corresponding position was mapped in the reporting.
  • Clarification of the need for central versus regional leadership in a Next 10 law firm, which emerged from several mergers of regional firms, which has now become part of an international network and has made corresponding commitments for this. 

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