The
Big Four are the four largest international
accountancyAccountancy or accounting is the art of communicating financial information about a business entity to users such as shareholders and managers...
and
professional servicesProfessional services are infrequent, technical, or unique functions performed by independent contractors or consultants whose occupation is the rendering of such services...
firms, which handle the vast majority of
auditsA financial audit, or more accurately, an audit of financial statements, is the review of the financial statements of a company or any other legal entity , resulting in the publication of an independent opinion on whether or not those financial statements are relevant, accurate, complete, and...
for
publicly traded companiesA publicly-traded company is a company that has permission to offer its registered securities for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter via market makers who use non-exchange quotation services.-Securities...
as well as many private companies, creating an
oligopolyAn oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek oligoi 'few' and poleein 'to sell'. Because there are few sellers, each oligopolist is likely to be aware of the actions of the...
over the auditing industry. The Big Four firms are shown below, with their latest publicly available data:
This group was once known as the "Big Eight", and was reduced to the "Big Five" by a series of mergers.
The
Big Four are the four largest international
accountancyAccountancy or accounting is the art of communicating financial information about a business entity to users such as shareholders and managers...
and
professional servicesProfessional services are infrequent, technical, or unique functions performed by independent contractors or consultants whose occupation is the rendering of such services...
firms, which handle the vast majority of
auditsA financial audit, or more accurately, an audit of financial statements, is the review of the financial statements of a company or any other legal entity , resulting in the publication of an independent opinion on whether or not those financial statements are relevant, accurate, complete, and...
for
publicly traded companiesA publicly-traded company is a company that has permission to offer its registered securities for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter via market makers who use non-exchange quotation services.-Securities...
as well as many private companies, creating an
oligopolyAn oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek oligoi 'few' and poleein 'to sell'. Because there are few sellers, each oligopolist is likely to be aware of the actions of the...
over the auditing industry. The Big Four firms are shown below, with their latest publicly available data:
| Firm |
Revenues |
Employees |
Fiscal Year |
Source |
PricewaterhouseCoopersPricewaterhouseCoopers is one of the world's largest professional services firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London....
|
$26.2bn |
163,000 |
2009 |
http://www.reuters.com/article/marketsNews/idUSN0643140220091006 |
Ernst & YoungErnst & Young is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and KPMG...
|
$21.4bn |
144,441 |
2009 |
http://www.reuters.com/article/pressRelease/idUS70452+30-Sep-2009+BW20090930 |
Deloitte Touche TohmatsuDeloitte Touche Tohmatsu is one of the largest professional services organizations in the world and one of the Big Four auditors, along with PricewaterhouseCoopers, Ernst & Young, and KPMG....
|
$27.4bn |
165,000 |
2008 |
http://www.deloitte.com/dtt/section_node/0,1042,sid%253D147431,00.html |
KPMGKPMG is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and Ernst & Young . Its global headquarters are located in Amstelveen, Netherlands.KPMG employs over 136,500 people in a global network...
|
$22.7bn |
135,000 |
2008 |
http://www.kpmg.com/Global/PressRoom/PressReleases/Pages/KPMG-2008-revenues-grow.aspx |
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 near-demise of
Arthur AndersenArthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
in 2002, following its involvement in the
Enron ScandalThe Enron scandal, revealed in October 2001, involved the energy company Enron and the accounting, auditing, and consultancy partnership of Arthur Andersen. The corporate scandal eventually led to Enron's downfall, resulting in the largest bankruptcy in American history at the time...
.
Legal structure
None of the Big Four accounting firms is a single firm. 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 two cases (KPMG and Deloitte Touche Tomatsu), the co-ordinating entity is Swiss, and in two cases (PricewaterhouseCoopers and Ernst & Young) the co-ordinating entity is a UK
limited companyA limited company in the United Kingdom or Ireland is a corporation whose liability is limited by shares , which is the most common form of privately held company. Its equivalent in Australia is Proprietary company...
. Those entities do not themselves practice accountancy, and do not own or control the member firms.
In most cases each member firm practices in a single country, and is structured to comply with the regulatory environment in that country. However, in 2007 KPMG announced a merger of four member firms (in the United Kingdom, Germany, Switzerland and Liechtenstein) to form a single firm.
The figures in this article refer to the combined revenues of each network of firms.
Mergers and the Big Auditors
Since 1989, mergers and one major scandal involving Arthur Andersen have reduced the number of major accountancy firms from eight to four.
Big 8 (until 1989)
The firms were called the
Big 8 for most of the 20th century, reflecting the international dominance of the eight largest accountancy firms:
- Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
- Arthur Young & Co.
Ernst & Young is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and KPMG...
- Coopers & Lybrand
PricewaterhouseCoopers is one of the world's largest professional services firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London....
- Ernst & Whinney
Ernst & Young is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and KPMG...
(until 1979 Ernst & Ernst in the US and Whinney Murray in the UK)
- Deloitte Haskins & Sells
Deloitte Touche Tohmatsu is one of the largest professional services organizations in the world and one of the Big Four auditors, along with PricewaterhouseCoopers, Ernst & Young, and KPMG....
(until 1978 Haskins & Sells in the US and Deloitte Plender Griffiths in the UK)
- Peat Marwick Mitchell
KPMG is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and Ernst & Young . Its global headquarters are located in Amstelveen, Netherlands.KPMG employs over 136,500 people in a global network...
, later Peat Marwick
- Price Waterhouse
PricewaterhouseCoopers is one of the world's largest professional services firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London....
- Touche Ross
Deloitte Touche Tohmatsu is one of the largest professional services organizations in the world and one of the Big Four auditors, along with PricewaterhouseCoopers, Ernst & Young, and KPMG....
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.
The firms' initial international expansion was driven by the needs of British and US based
multinationalsA multinational corporation or transnational corporation , also called multinational enterprise , is a corporation or enterprise that manages production or delivers services in more than one country...
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.
Big 6 (1989-1998)
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 & YoungErnst & Young is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and KPMG...
in June, and Deloitte, Haskins & Sells merged with Touche Ross to form Deloitte & Touche in August.
Confusingly, in the
United KingdomThe United Kingdom of Great Britain and Northern Ireland is a sovereign state located off the northwestern coast of continental Europe. It is an island country, spanning an archipelago including Great Britain, the northeastern part of Ireland, and many small islands...
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
AustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the continental mainland , the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans...
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 (later DTT International), to avoid use of names which would have been ambiguous (as well as contested) in certain markets.
Big 5 (1998-2002)
The Big 6 became the
Big 5 in July 1998 when Price Waterhouse merged with Coopers & Lybrand to form
PricewaterhouseCoopersPricewaterhouseCoopers is one of the world's largest professional services firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London....
.
Big 4 (2002-)
The
EnronEnron Corporation was an American energy company based in Houston, Texas. Before its bankruptcy in late 2001, Enron employed approximately 22,000 and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of nearly $101 billion...
collapse and ensuing investigation prompted scrutiny of their financial reporting, which was audited by
Arthur AndersenArthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
, which eventually was indicted for obstruction of justice for shredding documents related to the audit in the
2001 Enron scandalTimeline of the Enron scandal:-1985:Kenneth Lay seized control in 1985 of HNG/Internorth created by the merger of Houston Natural Gas and the much larger and more diversified InterNorth, which combined four natural gas pipeline companies, Northern Natural Gas, Transwestern Pipeline, Florida Gas...
. 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 & YoungErnst & Young is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers , Deloitte Touche Tohmatsu and KPMG...
globally, Deloitte & Touche in the UK and Canada, and
PricewaterhouseCoopersPricewaterhouseCoopers is one of the world's largest professional services firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London....
in China and Hong Kong.
Big 4 are sometimes referred as "Final Four" due to 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 the auditors.
Mergers and developments
- Arthur Andersen
- Developed from Andersen, Delany
- Ernst & Young
- Arthur Young
- Ernst & Whinney
- Ernst & Ernst (US)
- Whinney Murray (UK)
- Whinney, Smith & Whinney
- PricewaterhouseCoopers
- Coopers & Lybrand
- Cooper Brothers (UK)
- Lybrand, Ross Bros, Montgomery (US)
- Price Waterhouse
- Deloitte Touche Tohmatsu
- Deloitte & Touche
- Deloitte Haskins & Sells
- Deloitte Plender Griffiths (UK)
- Haskins & Sells (US)
- Touche Ross
- Touche, Ross, Bailey & Smart
- Ross, Touche (Canada)
- George A. Touche (UK)
- Touche, Niven, Bailey & Smart (US)
- Touche Niven
- Bailey
- A. R. Smart
- Tohmatsu & Co. (Japan)
- KPMG
- Peat Marwick Mitchell
- William Barclay Peat (UK)
- Marwick Mitchell (US)
- KMG
- Klynveld Main Goerdeler
- Klynveld Kraayenhof (Netherlands)
- Thomson McLintock (UK)
- Main Lafrentz (US)
- Deutsche Treuhand Gesellschaft (Germany)
Policy issues concerning industry concentration
In the wake of industry concentration and individual firm failure, the issue of a credible alternative industry structure has been raised. 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.
Egypt
In
EgyptEgypt , officially the Arab Republic of Egypt, is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Western Asia...
, the "Big auditor firms" are local affiliates of the Big Network international firms:
1- Hazem hassan - KPMG.
2- Mazars Mostafa Shawki & Co.
3- Mansour & Co. - PricewaterhouseCoopers.
4- Mohamed Othman;— Deloitte Touche Tohmatsu (DTT).
5- Emad Ragheb — Ernst & Young.
Indonesia
In
IndonesiaThe Republic of Indonesia is a country in Southeast Asia and Oceania. Indonesia comprises 17,508 islands. With an estimated population of around 237 million people, it is the world's fourth most populous country, with the world's largest population of Muslims.Indonesia is a republic, with an...
, there are four large auditors, all are affiliates of the Big Four:
- KAP Purwantono, Sarwoko, Sandjaja — affiliate of Ernst & Young
- KAP Osman Bing Satrio — Deloitte Touche Tohmatsu (DTT)
- KAP Sidharta, Sidharta, Widjaja — affiliate of KPMG
- KAP Haryanto Sahari — affiliate of PwC
Israel
In
IsraelIsrael officially the State of Israel , is a developed state in Western Asia located on the eastern shore of the Mediterranean Sea. It borders Lebanon in the north, Syria in the northeast, Jordan in the east, and Egypt on the southwest, and contains geographically diverse features within its...
, there are five large auditors, four of whom are affiliates of the Big Four
http://duns100.dundb.co.il/ts.cgi?tsscript=/2009h/Accountancy1&order=Accountants%20desc&page=1:
- Kost, Forer, Gabbay & Kasierer (Ernst & Young Israel)
- KPMG Somekh Chaikin
- Deloitte Brightman Almagor Zohar
- Kesselman & Kesselman, PwC Israel
- BDO Ziv Haft (affiliate of BDO International
BDO International is a worldwide network of public accountancy firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country. The network, originally formed in 1963, is coordinated by BDO Global Coordination B.V., with an...
)
Japan
In
Japanis an island country in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, People's Republic of China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, the “Big Four auditors” are local affiliates of the Big Four international firms:
- Ernst & Young ShinNihon LLC — affiliate of Ernst & Young
- KPMG AZSA & Co. - affiliate of KPMG
- PricewaterhouseCoopers Aarata — affiliate of PricewaterhouseCoopers
- Deloitte Touche Tohmatsu — affiliate of Deloitte Touche Tohmatsu (DTT)
English names of each firm are different from Japanese ones. Ernst & Young ShinNihon LLC is 'ShinNihon Yugen-sekinin Kansa Houjin新日本有限責任監査法人,' KPMG AZSA & Co. is 'Azsa Kansa Houjinあずさ監査法人,' PricewaterhouseCoopers Aarata is 'Aarata Kansa Houjinあらた監査法人,' and Deloitte Touche Tohmatsu is 'Kansa Houjin Tohmatsu監査法人トーマツ.'
Following the discovery of the accounting fraud at Kanebo, the
Financial Services AgencyThe is a Japanese government organization responsible for overseeing banking, securities and exchange, and insurance in order to ensure the stability of the financial system of Japan. The agency operates with a commissioner and reports to the Minister of Financial Services...
in Japan suspended ChuoAoyama from conducting audit work for inadequate internal controls, for two months from July 1, 2006 onwards. On July 1, 2006, PwC started a new accountancy firm in Japan, called PricewaterhouseCoopers Aarata. Unlike ChuoAoyama, which is a network firm of PwC, PricewaterhouseCoopers Aarata is a member firm of the PwC global network and will adopt its internal controls and methodologies.
http://www.pwc.com/extweb/ncpressrelease.nsf/docid/0F5DAE3C47C4A4798025718C0030FC36 Misuzu dissolved in 2007.
Republic of Korea
The following domestic accountancy firms have joined the membership of international Big Four firms.
- Hanyoung LLC — member of Ernst & Young
- Samjong LLC — member of KPMG
- Samil LLC — member of PricewaterhouseCoopers
- Ahnjin LLC — member of Deloitte Touche Tohmatsu (DTT)
Saudi Arabia
In
Saudi ArabiaSaudi Arabia , is an Arab country and the largest country of the Arabian Peninsula. It is bordered by Jordan on the northwest, Iraq on the north and northeast, Kuwait, Qatar, Bahrain, and the United Arab Emirates on the east, Oman on the southeast, and Yemen on the south...
, the "Big Four auditors" are local affiliates of the Big Four international firms;
- Deloitte & Touche Bakr Abulkhair & Co - member of Deloitte Touche Tohmatsu (DTT)
- PricewaterhouseCoopers AlJuraid - member of PricewaterhouseCoopers
- Ernst & Young Saudi Arabia - member of Ernst & Young
- KPMG Al Fozan & Al Sadhan - member of KPMG
Turkey
In
TurkeyTurkey , known officially as the Republic of Turkey
, is a Eurasian country that stretches across the Anatolian peninsula in Western Asia and Thrace in the Balkan region of southeastern Europe...
, the "Big Four auditors" are local affiliates of the Big Four international firms;
- Güney Bagimsiz Denetim ve S.M.M. A.S. - member of Ernst & Young,
- Akis Bagimsiz Denetim ve S.M.M. A.S. - affiliate of KPMG,
- Basaran Nas Bagimsiz Denetim ve S.M.M. A.S. - affiliate of PwC
- DRT Bagimsiz Denetim ve S.M.M. A.S. - affiliate of Deloitte Touche Tohmatsu (DTT)
In addition to the big four, there are other affiliate companies which have weaker affiliate relations compared to affiliates of big four.
India
In India, the member firms are not permitted to change their names to match the international brands. The local firms are:
- Price Waterhouse, member of PwC
- Deloitte Haskins & Sell, member of Deloitte Touche Tohmatsu (DTT)
- BSR & Co, member of KPMG
- SRBotliboi, member of Ernst & Young
Pakistan
In
PakistanPakistan , officially the Islamic Republic of Pakistan, is a country located at the crossroads of South Asia, the Middle East, and Central Asia...
, the Big Four are affiliates of the following local audit firms, which are the prominent firms of Pakistan:
- Ernst & Young (Pakistan)- Formerly Ford Rhodes Sidat Hyder & Co.
- Taseer Hadi & Co. - member of KPMG International
- M. Yousuf Adil Saleem & Co — member of Deloitte Touche Tohmatsu (DTT)
- A. F. Ferguson & Co. - Member of PricewaterhouseCoopers
The Philippines
In the Philippines, the affiliate firms of the Big Four are:
- Manabat Delgado Amper & Co. (formerly C.L. Manabat & Co.) - affiliate of Deloitte Touche Tohmatsu (DTT)
- Isla Lipana & Co. (formerly Joaquin Cunanan & Co.) - affiliate of PwC
- Manabat Sanagustin & Co. (formerly Laya Mananghaya & Co.) - affiliate of KPMG
- Sycip Gorres Velayo & Co. (SGV & Co.) - affiliate of Ernst & Young
Sri Lanka
In Sri Lanka the afiliated firms of the big four are:
- Someswaran & Jayawickrama, Manoharan & Sangakkara (SJMS) Associates — Deloitte Touche Tomatsu (DTT)
- KPMG
- PricewaterhouseCoopers
- Grant Thornton
Sweden
- KPMG Bohlins
- Öhrlings PricewaterhouseCoopers
- Deloitte Touche Tohmatsu (formerly TRG Revision)
- Ernst & Young (formerly Hagström & Olsson)
External links