Big Four accounting firms


The Big Four is the nickname used to refer collectively to the four largest professional services networks in the world, consisting of Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers. The four networks are often grouped together for a number of reasons; they are each comparable in size relative to the rest of the market, both in terms of revenue and workforce; they are each considered equal in their ability to provide a wide scope of quality professional services to their clients; and, among those looking to start a career in professional services, particularly accounting, they are considered equally attractive networks to work in, because of the frequency with which these firms engage with Fortune 500 companies.
The Big Four each offer audit, assurance, taxation, management consulting, actuarial, corporate finance, and legal services to their clients. A significant majority of the audits of public companies, as well as many audits of private companies, are conducted by these four networks.
Until the late 20th century, the market for professional services was actually dominated by eight networks which were aptly nicknamed the "Big 8". The Big Eight consisted of Arthur Andersen, Coopers & Lybrand, Deloitte Haskins and Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, Touche Ross, and Arthur Young.
The Big Eight gradually reduced due to mergers between these firms, as well as the 2002 collapse of Arthur Andersen, leaving four networks dominating the market at the turn of the 21st century. In the United Kingdom in 2011, it was reported that the Big Four account for the audits of 99% of the companies in the FTSE 100 Index, and 96% of the companies in the FTSE 250 Index, an index of the leading mid-cap listing companies. Such a high level of industry concentration has caused concern, and a desire among some in the investment community for the Competition & Markets Authority to consider breaking up the Big Four. In October 2018, the CMA announced it would launch a detailed study of the Big Four's dominance of the audit sector.

Legal structure

None of the "firms" within the Big Four is actually a single firm; rather, they are professional services networks. Each is a network of firms, owned and managed independently, which have entered into agreements with the other member firms in the network to share a common name, brand, intellectual property, and quality standards. Each network has established a global entity to co-ordinate the activities of the network. In the case of KPMG, the co-ordinating entity is a Swiss association, and in the cases of Deloitte, PricewaterhouseCoopers and Ernst & Young, the co-ordinating entity is a UK limited company. Those entities do not themselves perform external professional services, nor do they own or control the member firms. Nevertheless, these networks colloquially are referred to as "firms" for the sake of simplicity and to reduce confusion with lay-people. These accounting and professional services networks are similar in nature to how law firm networks in the legal profession work.
In many cases, each member firm practices in a single country, and is structured to comply with the regulatory environment in that country.
Ernst & Young also includes separate legal entities which manage three of its four geographic areas: the Americas, Asia-Pacific, and EMEIA groups, the fourth area being Japan, which has no larger co-ordination branch. These entities coordinate services performed by local firms within their respective areas, but do not perform services or hold ownership in the local entities. There are rare exceptions to this convention; in 2007, KPMG announced a merger of four internationally distinct member firms to form a single firm.

History of mergers

Since the 1980s, numerous mergers and one major scandal involving Arthur Andersen, have reduced the number of major professional-services firms from eight to four.

Big Eight

The firms were called the Big Eight for most of the 20th century, reflecting the international dominance of the eight largest firms:
Most of the Big Eight originated in an alliance formed between British and US audit firms in the 19th or early 20th centuries. The firms' initial international expansion were driven by the needs of British and American based multinationals for worldwide service. They expanded by forming local partnerships, or by forming alliances with local firms. Arthur Andersen was the exception: the firm originated in the United States, and then expanded internationally by establishing its own offices in other markets, including the United Kingdom.
Price Waterhouse was a UK firm which opened a US office in 1890, and later 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. For instance, Touche Ross was named such in 1960, Arthur Young, McLelland, Moores & Co in 1968, Coopers & Lybrand in 1973, Deloitte Haskins & Sells in 1978, and Ernst & Whinney in 1979.
In the 1980s the Big 8, each with global branding, adopted modern marketing and grew rapidly. They merged with many smaller firms. KPMG was the result of one of the largest of these mergers. In 1987, Peat Marwick merged with the Klynveld Main Goerdeler group to become KPMG Peat Marwick, later known simply as KPMG. Note that this was not the result of a merger between any of the Big Eight.

Big Six

Competition among these firms intensified, and the Big Eight became the Big Six in 1989. In that year, 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.
The Big Six after both mergers occurred were:
There has been some merging of ancestor firms, in some localities, which would aggregate brands belonging to the Big Four today, but in different combinations than the present-day names would otherwise suggest. For example, the United Kingdom local firm of Deloitte, Haskins & Sells merged instead with the United Kingdom firm of Coopers & Lybrand. The resulting firm was called Coopers & Lybrand Deloitte, and the local firm of Touche Ross kept its original name. It wasn't until the mid-1990s that both UK firms changed their names to match those of their respective international organizations. Meanwhile, in Australia, the local firm of Touche Ross merged instead with KPMG. It is for these reasons that the Deloitte & Touche international organization was known as DRT International, to avoid use of names which would have been ambiguous, as well as contested, in certain markets.

Big Five

The Big Six became the Big Five, in July 1998, when Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers.
The Big Five at this point in time were:
Finally, the insolvency of Arthur Andersen stemming from their involvement in the 2001 Enron Scandal, produced the Big Four:
The Enron collapse and ensuing investigation prompted scrutiny of the company's financial reporting, which that year was audited by Arthur Andersen. Arthur Andersen was eventually indicted for obstruction of justice for shredding documents related to the audit in the Enron scandal. The resulting conviction, although it was later overturned, still effectively meant the end of Arthur Andersen, because the firm was not allowed to take on new clients while they were under investigation. Most of its country practices around the world were sold to members of what is now the Big Four - notably Ernst & Young globally; Deloitte & Touche in the United Kingdom, Canada, Spain, and Brazil; and PricewaterhouseCoopers in China and Hong Kong.

Revenue comparison

In 2010, Deloitte, with its 1.8% growth, was able to outpace PricewaterhouseCoopers' 1.5% growth, gaining "first place" in revenue size, and became the largest firm in the professional services industry. In 2011, PwC re-gained first place with 10% revenue growth. In 2013, these two firms claimed the top two spots with only a $200 million revenue difference, that is, within half a percent. However, Deloitte saw faster growth than PwC over the next few years and reclaimed the title of largest of the Big Four in Fiscal Year 2016.
It was estimated that the Big Four had about a 67% share of the global accountancy market in 2012, while most of the rest was divided among so called mid-tier players, such as BDO, Crowe Global and Grant Thornton.

Criticism

Cartel fears

In Australia, the heads of the big four firms have met regularly for dinner, a parliamentary committee was told in 2018. The revelation was among issues which led to an inquiry by the Australian Competition & Consumer Commission into possible collusion in the selling of audit and services. However, Ernst & Young told the inquiry that the dinners, which were held once or twice a year, were to discuss industry trends and issues of corporate culture such as inclusion and diversity.

Tax avoidance

According to Australian taxation expert George Rozvany, the Big Four are "the masterminds of multinational tax avoidance and the architects of tax schemes which cost governments and their taxpayers an estimated $US1 trillion a year". At the same time they are advising governments on tax reforms, they are advising their multinational clients how to avoid taxes.

Market concentration

In the wake of industry concentration and the occasional firm failure, the issue of a credible alternative industry structure has been raised. The limiting factor on the expansion of the Big Four to include additional firms, is that although some of the firms in the next tier have become quite substantially large, or have formed international networks, effectively all large public companies insist on having an audit performed by a Big Four network. This creates the complication that smaller firms have no way to compete well enough to make it into the top end of the market.
In 2011, the House of Lords of United Kingdom completed an inquiry into the financial crisis, and called for an Office of Fair Trading investigation into the dominance of the Big Four. 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.

Corporate collusion

Documents published in June 2010 show that some UK companies' banking covenants required them to use one of the Big Four. This approach from the lender prevents firms in the next tier from competing for audit work for such companies. The British Bankers' Association said that such clauses are rare. Current discussions in the UK consider outlawing such clauses.
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 5% of all reports.
The January 2018 collapse of the UK construction and services company Carillion raised further questions about the Big Four, all of which had advised the company before its liquidation. On 13 February 2018, the Big Four were described by MP and chair of the Work and Pensions Select Committee Frank Field as "feasting on what was soon to become a carcass" after collecting fees of £72m for Carillion work during the years leading up to its collapse. The final report of a Parliamentary inquiry into the collapse of Carillion, published on 16 May 2018, accused the Big Four accounting firms of as a "cosy club", with KPMG singled out for its "complicity" in signing off Carillion’s "increasingly fantastical figures" and internal auditor Deloitte accused of failing to identify, or ignoring, "terminal failings". The report recommended the Government refer the statutory audit market to the Competition and Markets Authority, urging consideration of breaking up the Big Four. In September 2018, Business Secretary Greg Clark announced he had asked the CMA to conduct an inquiry into competition in the audit sector, and on 9 October 2018, the CMA announced it had launched a detailed study. MPs have asked for the separation of the "Big Four" into multiple units after the collapse of Carillion and BHS as it would help in providing the professional skepticism required to furnish high quality audits. In July 2020, the UK Financial Reporting Council told the Big Four that they must submit plans by October 2020 to separate their audit and consultancy operations by 2024.
A 2019 analysis by Public Company Accounting Oversight Board in the United States observed that the big four accounting firms bungled almost 31% of their audits since 2009. In another project study on government oversight, it was seen that while the auditors colluded to present audit reports that pleased their clients, the times when they didn't they lost business. Despite this large-scale collusion in audits, the PCAOB in its 16-year history has only made 18 enforcement cases against the "big four". Although these auditors have failed audits in 31% of cases, they have only faced action by PCAOB in 6.6% of the cases. KPMG has never been fined despite having the worst audit failure rate of 36.6%.

Global member firms

RegionDeloittePwCErnst & YoungKPMG
AustraliaDeloitte AustraliaPricewaterhouseCoopersErnst & YoungKPMG
ArgentinaDeloitte & Co. S.A.Pricewaterhouse & Co. S.R.L.Ernst & YoungKPMG
BangladeshNUFHASPwCA.Qasem & Co., Chartered AccountantsRahman Rahman Huq & Co., Chartered Accountants
BrazilDeloittePwCEYKPMG
BulgariaDeloittePwCEYKMPG
CambodiaDeloittePricewaterhouseCoopers Ltd.Ernst and YoungKMPG
CanadaDeloittePwCEYKPMG
ChinaDeloitte Hua YongPricewaterhouseCoopers Zhong TianErnst & Young Hua MingKPMG Hua Zhen
ColombiaDeloittePwCEYKPMG
CroatiaDeloittePwC HrvatskaEYKPMG
CyprusDeloittePricewaterhouseCoopersErnst & YoungKPMG
EgyptSaleh, Barsoum & Abdel AzizMansour & Co.Allied for Accounting and Auditing Hazem Hassan
El SalvadorDTT El Salvador, S.A. de C.V.PricewaterhouseCoopers El SalvadorErnst & Young El Salvador, S.A. de C.V.KPMG, S.A.
FinlandDeloitte & Touche OyPricewaterhouseCoopers OyErnst & Young OyKPMG Oy Ab
FranceDeloittePricewaterhouseCoopers France et Pays Francophones d’AfriqueEY TRANSACTION SERVICESKPMG
GhanaDeloittePwCEYKPMG
Hong KongDeloittePricewaterhouseCoopersErnst & YoungKPMG
IndiaDeloittePricewaterhouseCoopersEYKPMG
IndonesiaKAP Imelda & RekanKAP Tanudiredja, Wibisana, Rintis & RekanKAP Purwantono, Sungkoro & SurjaKAP Sidharta Widjaja & Rekan
IrelandDeloittePwCEYKPMG
IsraelDeloitte Brightman Almagor Zohar Kesselman & Kesselman, PwC IsraelKost, Forer, Gabbay & Kasierer KPMG Somekh Chaikin
ItalyDeloitte Touche TohmatsuPricewaterhouseCoopersReconta Ernst & Young SpA, Ernst & Young Financial Business Advisors SpA,KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides S.p.A.
JapanDeloitte Touche Tohmatsu
Kansa Houjin Tohmatsu		PricewaterhouseCoopers Aarata
Aarata Kansa Houjin
PricewaterhouseCoopers Kyoto
Ernst & Young ShinNihon LLC
ShinNihon Yugen-sekinin Kansa Houjin		KPMG AZSA LLC
Azsa Kansa Houjin
JordanDeloitte Touche PwCErnst & YoungKPMG
KazakhstanDeloittePwCEYKPMG
KenyaDeloitte & Touche PwCErnst & YoungKPMG
KyrgyzstanDeloitte-EYKPMG
LebanonDeloitte Touche PwCErnst & YoungKPMG PCC
MalaysiaDeloitte PLTPricewaterhouseCoopersErnst & YoungKPMG PLT
MalawiDeloittePriceWaterhouseCooper Ernst & YoungNot available
MaltaDeloittePwCEY MaltaKPMG
MauritiusDeloittePwCEYKPMG
MexicoGalaz, Yamazaki, Ruiz Urquiza, S.C.PricewaterhouseCoopers MéxicoMancera S.C.KPMG Cárdenas Dosal, S.C.
MongoliaDeloitte OnchPwCErnst & Young MongoliaKPMG
MoroccoDeloitte Touche PwCErnst & YoungKPMG
New ZealandDeloittePwCEYKPMG
NigeriaAkintola Williams DeloittePwC NigeriaErnst & YoungKPMG
PakistanDeloitte Yousuf AdilA. F. Ferguson & Co.EY Ford RhodesKPMG Taseer Hadi & Co.
Palestinian TerritoriesDeloitte Touche PwCErnst & Youngnone
PeruDELOITTE & TOUCHE SRLPRICEWATERHOUSECOOPERS S.CIVIL DE R.L.ERNST & YOUNG SRLKPMG SAC
PhilippinesNavarro Amper & Co Isla Lipana & Co.SyCip Gorres Velayo & Co.R.G. Manabat & Co.
PolandDeloittePwCEYKPMG
RomaniaDeloitte Audit S.R.L., Deloitte Tax S.R.L., Deloitte Consultanta S.R.L., Deloitte Evaluare S.R.L. Deloitte Fiscal Representative S.R.L. and Reff & Associates SCA PricewaterhouseCoopers Audit SRL, PricewaterhouseCoopers Tax Advisors & Accountants SRL, PricewaterhouseCoopers Consultants SRL, PricewaterhouseCoopers Business Recovery Services IPURL, PricewaterhouseCoopers Servicii SRLErnst & Young SRL Ernst & Young Support Services SRLKPMG Romania S.R.L.
Saudi ArabiaDeloitte and Touche & Co. - Chartered AccountantsPricewaterhouseCoopers LLPErnst & Young Saudi ArabiaKPMG Al Fozan & Partners
SerbiaDeloitte d.o.o. BeogradPricewaterhouseCoopers d.o.o. BeogradErnst & Young d.o.o. BeogradKPMG d.o.o Beograd
Slovak RepublicDeloitte Audit s.r.o.PricewaterhouseCoopers Slovensko, s.r.o.Ernst & Young Slovakia, spol. s r.o.KPMG Slovensko spol. s r.o.
South AfricaDeloittePwCEYKPMG
South KoreaAnjin LLCSamil LLCHanyoung LLCSamjong LLC
Sri LankaSJMS Associates PwCErnst & YoungKPMG
SwedenDeloitte Touche TohmatsuÖhrlings PricewaterhouseCoopersErnst & YoungKPMG
SyriaDeloitte - Nassir Tamimi Chartered AccountantPricewaterhouseCoopersAbdul Kader Hussarieh and partnersMejanni & Co. Chartered Accountants and Consultants LLC
ThailandDeloitte & Touche TohmatsuPricewaterhouseCoopersErnst & YoungKPMG
TaiwanDeloitte Asia Pacific Services LimitedPricewaterhouseCoopers TaiwanErnst & YoungKPMG
TurkeyDRT Bagimsiz Denetim ve S.M.M. A.S.Basaran Nas Bagimsiz Denetim ve SMMM A.S.Güney Bağımsız Denetim ve S.M.M. A.Ş., Kuzey Y.M.M. Denetim A.Ş., Ernst Young Kurumsal Finansman Danışmanlık A.Ş., BEY S.M.M. A.Ş.Akis Bagimsiz Denetim ve S.M.M. A.S.
United StatesDeloitte LLPPricewaterhouseCoopers LLPErnst & Young LLPKPMG LLP
UzbekistanDeloitte Touche TohmatsuASC PricewaterhouseCoopersErnst & Young LLCKPMG Audit LLC
VenezuelaLara Marambio & Asociados - DeloittePacheco, Apostólico & Asociados - PricewaterhouseCoopersEYRodriguez Velasquez & Asociados - KPMG
VietnamDeloittePwCEYKPMG
UgandaDeloittePwCEYKPMG
ZimbabweDeloittePwCEYKPMG

Branding list
Showing year of formation through merger, or adoption of single brand name.