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|---|---|
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| Fields of accounting | |
| Cost · Financial · Forensic · Fund · Management · Tax (U.S.) | |
| Financial statements | |
| Balance sheet · Cash flow statement · Statement of retained earnings · Income statement · Notes · Management discussion and analysis · XBRL | |
| Auditing | |
| Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act | |
| Accounting qualifications | |
| CA · CPA · CCA · CGA · CMA · CAT · CFA · CIIA · IIA · CTP · ACCA |
The Big Four are the four largest international professional services networks in accountancy and professional services, which handle the vast majority of audits for publicly traded companies as well as many private companies, creating an oligopoly in auditing large companies. The Big Four firms are shown below, with their latest publicly available data:
| Firm | Revenues | Employees | Fiscal Year | Headquarters | Source |
|---|---|---|---|---|---|
| PwC (officially PricewaterhouseCoopers) | $29.2bn | 169,000 | 2011 | United Kingdom | [1] |
| Deloitte Touche Tohmatsu | $28.8bn | 182,000 | 2011 | United States | [2] |
| Ernst & Young | $22.9bn | 152,000 | 2011 | United Kingdom | [3] |
| KPMG | $22.7bn | 138,000 | 2011 | Netherlands | [4] |
This group was once known as the "Big Eight", and was reduced to the "Big Five" by a series of mergers. The Big Five became the Big Four after the demise of Arthur Andersen in 2002, following its involvement in the Enron scandal.
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None of the Big Four accounting firms is a single firm - rather, they are accounting networks. Each is a network of firms, owned and managed independently, which have entered into agreements with other member firms in the network to share a common name, brand and quality standards. Each network has established an entity to co-ordinate the activities of the network. In one case (KPMG), the co-ordinating entity is Swiss, and in three cases (Deloitte Touche Tohmatsu, PricewaterhouseCoopers and Ernst & Young) the co-ordinating entity is a UK limited company. Those entities do not themselves practice accountancy, and do not own or control the member firms. They are similar to law firm networks found in the legal profession.
In many cases each member firm practises in a single country, and is structured to comply with the regulatory environment in that country. In 2007 KPMG announced a merger of four member firms (in the United Kingdom, Germany, Switzerland and Liechtenstein) to form a single firm.
Ernst & Young also includes separate legal entities which manage three of its four areas: Americas, EMEIA (Europe, The Middle East, India and Africa), and Asia-Pacific. (Note: the Japan area does not have a separate area management entity). These firms coordinate services performed by local firms within their respective areas but do not perform services or hold ownership in the local entities.[5]
The figures in this article refer to the combined revenues of each network of firms.
Since 1989, mergers and one major scandal involving Arthur Andersen have reduced the number of major accountancy firms from eight to four.
The firms were called the Big 8 for most of the 20th century, reflecting the international dominance of the eight largest accountancy firms:
Most of the Big 8 originated in alliances formed between British and US accountancy firms in the 19th or early 20th centuries. Price Waterhouse was a UK firm which opened a US office in 1890 and subsequently established a separate US partnership. The UK and US Peat Marwick Mitchell firms adopted a common name in 1925. Other firms used separate names for domestic business, and did not adopt common names until much later: Touche Ross in 1960, Arthur Young (at first Arthur Young, McLelland Moores) in 1968, Coopers & Lybrand in 1973, Deloitte Haskins & Sells in 1978 and Ernst & Whinney in 1979.[6]
The firms' initial international expansion was driven by the needs of British and US based multinationals for worldwide service. They expanded by forming local partnerships or by forming alliances with local firms.
Arthur Andersen had a different history. The firm originated in the United States, and expanded internationally by establishing its own offices in other markets, including the United Kingdom.
In the 1980s the Big 8, each now with global branding, adopted modern marketing and grew rapidly. They merged with many smaller firms. One of the largest of these mergers was in 1987, when Peat Marwick merged with the KMG Group to become KPMG Peat Marwick, later known simply as KPMG.
Competition among these public accountancy firms intensified and the Big 8 became the Big 6 in 1989 when Ernst & Whinney merged with Arthur Young to form Ernst & Young in June, and Deloitte, Haskins & Sells merged with Touche Ross to form Deloitte & Touche in August.
Confusingly, in the United Kingdom the local firm of Deloitte, Haskins & Sells merged instead with Coopers & Lybrand. For some years after the merger, the merged firm was called Coopers & Lybrand Deloitte and the local firm of Touche Ross kept its original name. In the mid 1990s however, both UK firms changed their names to match those of their respective international organizations. On the other hand, in Australia the local firm of Touche Ross merged instead with KPMG.[7][8] It is for these reasons that the Deloitte & Touche international organization was known as DRT International (later DTT International), to avoid use of names which would have been ambiguous (as well as contested) in certain markets.
The Big 6 became the Big 5 in July 1998 when Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers.
The Enron collapse and ensuing investigation prompted scrutiny of their financial reporting, which was audited by Arthur Andersen, which eventually was indicted for obstruction of justice for shredding documents related to the audit in the 2001 Enron scandal. The resulting conviction, since overturned, still effectively meant the end for Arthur Andersen. Most of its country practices around the world have been sold to members of what is now the Big Four, notably Ernst & Young globally, Deloitte & Touche in the UK, Canada and Brazil, and PricewaterhouseCoopers(now known as PwC) in China and Hong Kong.
The Big 4 are sometimes referred to as the "Final Four" due to the widely held perception that competition regulators are unlikely to allow further concentration of the accounting industry and that other firms will never be able to compete with the Big 4 for top-end work, as there is a market perception that they are not credible as auditors or advisors to the largest corporations.
2002 saw the passage of the Sarbanes–Oxley Act into law, providing strict compliance rules to both businesses and their auditors.
In 2010 Deloitte with its 1.8% growth was able to beat PricewaterhouseCoopers with its 1.5% growth to gain first place and become the largest accounting firm in the industry.[9] In 2011, PwC re-gained the first place with 8% growth.
A year at the end indicates year of formation through merger or adoption of single brand name. A year in the beginning indicates date of closure of functioning or going out of prominence.
In the wake of industry concentration and individual firm failure, the issue of a credible alternative industry structure has been raised.[10] The limiting factor on the growth of additional firms is that although some of the firms in the next tier have become quite substantial, and have formed international networks, effectively all very large public companies insist on having a "Big Four" audit, so the smaller firms have no way to grow into the top end of the market.
Documents published in June 2010 show that some UK companies' banking covenants require them to use one of the Big Four. This approach from the lender prevents accounting firms in the next tier from competing for audit work for such companies. The British Bankers' Association said that such clauses are rare.[11] Current discussions in the UK consider outlawing such clauses.
In 2011,The UK House of Lords completed an inquiry into the financial crisis, and called for an Office of Fair Trading investigation into the dominance of the Big Four.[12] It is reported that the Big Four audit all but one of the companies that constitute the FTSE 100, and 240 of the companies in the FTSE 250, an index of the leading mid-cap listing companies.[13]
In Ireland, the Director of Corporate Enforcement, in February 2011 said, auditors "report surprisingly few types of company law offences to us", with the so-called "big four" auditing firms reporting the least often to his office, at just 5pc of all reports.[14]
| Country | Deloitte Touche Tohmatsu | PwC | Ernst & Young | KPMG |
|---|---|---|---|---|
| Argentina | Deloitte & Co. S.R.L | PricewaterhouseCoopers | Ernst & Young | Sibille |
| Bangladesh | Hoda Vasi Chowdhury & Co. | A. Qasem & Co. (AQC) | S. F. Ahmed & Co. | Rahman Rahman Huq |
| Brazil | Deloitte | PwC | Ernst & Young Terco | KPMG |
| China | DTT Hua Yong | PricewaterhouseCoopers Zhong Tian | Ernst & Young Hua Min | KPMG Hua Zhen |
| Egypt | Kamel Saleh | Mansour & Co. | Hazem Hassan | |
| India | Deloitte Haskins & Sells, A.F Ferguson, P C Hansotia, C C Chokshi & Co, S.B. Billimoria, Fraser & Ross and Touche Ross & co | Price Waterhouse, Price Waterhouse & Co., Lovelock & Lewes and Dalal & Shah | S.R.Batliboi & Co., S.R.Batliboi & Associates, S.V.Ghatalia & Associates | BSR & Co |
| Indonesia | KAP Osman Bing Satrio | KAP Tanudiredja, Wibisana & Rekan | KAP Purwantono, Sarwoko & Sandjaja | KAP Siddharta dan Widjaja |
| Israel | Deloitte Brightman Almagor Zohar | Kesselman & Kesselman, PwC Israel | Kost, Forer, Gabbay & Kasierer (Ernst & Young Israel) | KPMG Somekh Chaikin |
| Japan | Deloitte Touche Tohmatsu Kansa Houjin Tohmatsu |
PricewaterhouseCoopers Aarata Aarata Kansa Houjin |
Ernst & Young ShinNihon LLC ShinNihon Yugen-sekinin Kansa Houjin |
KPMG AZSA LLC (formerly KPMG AZSA & Co.) Azsa Kansa Houjin |
| Jordan | Deloitte Touche(M.E) | PwC | Ernst & Young | KPMG |
| Lebanon | Deloitte Touche(M.E) | PwC | Ernst & Young | |
| Malaysia | Deloitte KassimChan | PricewaterhouseCoopers | Ernst & Young | KPMG |
| Mexico | Galaz, Yamazaki, Ruiz Urquiza, S.C. | PricewaterhouseCoopers México | Ernst & Young | KPMG Cárdenas Dosal, S.C. |
| Morocco | Deloitte Touche(M.E) | PwC | Ernst & Young | KPMG |
| Nigeria | Akintola Williams Deloitte | PwC Nigeria | Ernst & Young | KPMG |
| Pakistan | M. Yousuf Adil Saleem & Co. | A. F. Ferguson & Co. | Ernst & Young Ford Rhodes Sidat Hyder | KPMG Taseer Hadi & Co. |
| Philippines | Manabat Delgado Amper & Co. | Isla Lipana & Co. | Sycip Gorres Velayo & Co. | Manabat Sanagustin & Co. |
| Saudi Arabia | Deloitte & Touche Bakr Abulkhair & Co | PricewaterhouseCoopers LLP | Ernst & Young Saudi Arabia | KPMG Al Fozan & Al Sadhan |
| South Africa | Deloitte Touche Tohmatsu | PWC | Ernst & Young | KPMG |
| South Korea | Anjin LLC | Samil LLC | Hanyoung LLC | Samjong LLC |
| Sri Lanka | PwC | Ernst & Young | KPMG | |
| Sweden | Deloitte Touche Tohmatsu | Öhrlings PricewaterhouseCoopers | KPMG | |
| Syria | Deloitte(M.E)- Nassir Tamimi Chartered Accountant | Pricewaterhousecoopers | Abdul Kader Hussarieh and partners | Mejanni & Co. Charted Accountants and Consultants LLC |
| Turkey | DRT Bagimsiz Denetim ve S.M.M. A.S. | Basaran Nas Bagimsiz Denetim ve SMMM A.S. | Güney Bagimsiz Denetim ve S.M.M. A.S. | Akis Bagimsiz Denetim ve S.M.M. A.S. |
| Uzbekistan. | Deloitte Touche Tohmatsu | ASC PricewaterhouseCoopers | Evan Young |
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