Accountancy giant Ernst & Young has admitted that it prefers not to take on small charity clients, but denied reports that it is deserting the charity market entirely.
A rival auditing firm told Third Sector this week that it was picking up work from charities because Ernst & Young had decided it was no longer profitable to audit them.
But Ernst & Young denied it had made a decision to withdraw from the charity sector altogether.
A spokesman said: "Ernst & Young is certainly not pulling out of auditing charities. We have a number of clients in the charity sector, the most prominent of which is Comic Relief, to which we offer and will continue to offer a range of services.
"But when it comes to charities of a certain size and scope, as with any client, we believe their needs will be more appropriately served by a smaller firm of advisers."
The Charity Commission confirmed that it has noted a trend for the "big four" accountancy firms - PricewaterhouseCoopers, KPMG, Deloitte & Touche, and Ernst & Young - to reduce the work they carry out in the charity sector.
Jon Thorne, head of financial regulation at the commission, said: "The big four have a decision to make. Historically they have done charity audits at a discount, but some of them have decided that this bit of their business has got to wash its face. So they have upped their fees and put the sector on a par with other businesses - and small and medium-sized firms are now moving in."
Medium-sized accountancy firms Baker Tilly and Numerica have both said they are picking up work from charity clients previously audited by the big four.