If you are reading this you are probably well aware of the term the ‘Big 4’ and its constituents. However to avoid any confusion, the term represents the four largest accountancy firms in the world. These firms are; PwC, EY, KPMG & Deloitte.
Generally speaking, each of the four firms are very similar in the services (Audit, Advisory, Tax, Consulting) they offer to clients and their organisational structure. There are geographic differences in terms of popularity, for example here in the UK PwC sit at the top spot in terms of UK fee income, whereas over in the US it is Deloitte who comfortably sit top of the pile in revenue terms.
The power of the big 4 has been largely untouched over recent history. It is indeed true that these four firms comprise a large number of highly skilled individuals, meaning large companies often find comfort in appointing a recognisable and respected brand if in need of professional services assistance.
Breaking up the big 4?
There has however been increasing pressure from authorities to shift the balance of power somewhat in recent years. Largely off the back of public outcry and criticism from audit failures, notably Wirecard, where it was discovered that EY had failed to obtain bank statements for 3 years, and Carillion, where it was found that a number of auditing standards had not been met by KPMG.
There are a number of reviews into audit quality ongoing such as the Brydon review and the FRCs Audit Quality Review. Several recommendations have been made in these reviews, from splitting out audit and non-audit services, to having dual audit firms. It is therefore clear that the Big 4 are facing increasing pressure by regulators.
Clearly, the public scrutiny on the Big 4 is increasing. The balance of power appears to be slowly shifting and regulators are increasingly concerned with performance. However, that said, The Big 4 remains, as has been the case since 2002 with the fall of Arthur Andersen (remember Enron?) and they appear to be here to stay for the long haul.