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2010 SEC Auditor Resignation Rates Climb Versus 2009

Resignation Rates

The overall SEC auditor resignation rate is up for 2010 compared to 2009 led by the Big Four firms even as the number of SEC auditor engagement switches is down, according to ANR's analysis of the calendar year 2010 auditor change database. (See methodology note, below.)

The analysis found nearly one in every five auditor switch in 2010 was the result of the current auditor resigning.

SEC auditors resigned from 19.1% of the SEC audit engagements that switched in calendar year 2010, up a shade more than two and a half percentage points compared to the 2009 figure of 16.5%.

The fact that the Big Four percentage of SEC audit engagement resignations is up for calendar year 2010, to 19.7%, shouldn’t surprise most observers given the resignation rate for calendar year 2009 was a paltry 10.1%.

While the resignation rate for the Big Four was up, the number of SEC audit switches involving the Big Four firms fell 31.2% to 137 for calendar year 2010.

Big Four SEC auditor engagement switches comprised 14.4% of the total number of auditor departures in 2010. By comparison, Big Four auditor switches made up 20% of the auditor engagement departures in 2009. 

In an interesting contrast, as the number of switches involving the profession’s four largest firms continues to shrink, hitting a new “low water mark,” the actual number of resignations for the group has climbed to its highest level since 2007, when the Big Four firms resigned from 63 SEC audit engagements. As a point of reference, the number of Big Four auditor switches in 2007 was 323. The number of Big Four auditor engagement switches and the number of Big Four auditor engagement resignations for 2010 are down approximately the same percentage from 2007, 57.6% and 57.1% respectively.

The national firms also saw their resignation rate rise in 2010 versus 2009. 

The group resigned from 18% of the engagements that posted a switch for any of the six auditors in the group during the year compared to 14.1% of the engagements that departed any of the six auditors in the group in calendar year 2009.  (See methodology, below.)

The regional and local firm resignation rate ticked up to 19% in 2010 compared to 18.6% in 2009. M&A had a larger impact in the regional and local firm category in 2010 than in the previous year while it was just the opposite in discipline, a greater impact in 2009 than 2010. (See methodology, below.)

Editor’s Note

For the purposes of this analysis, ANR used the calendar year 2009 and 2010 calendar year SEC auditor change data from and then deducted M&A-related departures and departures related to firms that had either their privilege to practice before the SEC revoked, denied or suspended along with departures related to PCAOB actions revoking a firm’s registration.

The auditor switches related to either “event” were removed from the figures prior to calculating the resignation rate, to provide a better representation of the current market.

For example, ANR removed 266 switches from the 2009 departure figures related to the SEC and PCAOB enforcement actions against Michael Moore and his firm, Moore & Assoc./Las Vegas. If those departures were not removed, the 2009 resignation rate for the regional and local firms would climb to 20.9% and the overall rate would go to 18.3%. It would not be a true resignation rate, because,  in general, when auditor switches are generated as a result of a disciplinary action were an audit firm is suspended, denied by the SEC or the firm’s PCAOB registration is revoked the vast majority of the switches are dismissals, thereby “artificially” lowering the resignation rate figure. The opposite is true with SEC auditor departures related to M&A. In 2010, McGladrey acquired Caturano & Co./Boston. As a result of the deal, 26 Caturano SEC audit clients switched auditors, with 23 engaging McGladrey & Pullen, affiliated with RSM McGladrey through an alternative practice structure, one chose a Big Four firm while two others did not choose a new audit firm as of the end of 2009.  All 26 of the switches created by the transactions were resignations, which by and large is the case when auditor switches are the result of an auditor’s M&A deal, to leave in departures related to M&A artificially inflates the resignation rate, especially in a year with a lot of M&A activity, like 2010 and 2009. is a premium online intelligence service delivering audit, regulatory and disclosure analysis to the accounting, legal and academic communities.  For information, call (508) 476-7007, email or visit

This is a portion of a story published in ANR's April 29 edition

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