Large accounting firms dominate emerging growth company audits

Large firms perform the majority of audits on emerging growth companies, according to the Public Company Accounting Oversight Board.

More than 1,000 (69%) of the 1,458 exchange-listed EGCs are audited by larger firms — that is, firms that issue more than 100 issuer audit clients in a given year — or their non-U.S. affiliates. Of the 1,141 EGCs that are not listed on an exchange and thus are only traded in over-the-counter markets, about half are audited by larger firms or their non-U.S. affiliates. 

The data is based on an analysis of financial statements filed with the Securities and Exchange Commission between May 16, 2022, and Nov. 15, 2023. 

An earlier report by the PCAOB, from Nov. 15, 2023, found there were 2,599 companies that self-identified as EGCs, reflecting a 14% decrease from 3,031 EGCs in November 2022. EGCs are a category of businesses defined by the JOBS Act of 2012 that receive reduced regulatory and reporting requirements to encourage their access to public capital markets. 

The 1,458 exchange-listed EGCs had a total U.S. market capitalization of $406 billion, a 48% decrease from the year prior. These EGCs represented only 0.7% of U.S. total market capitalization despite representing 26% of the 5,610 exchange-listed companies.