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.[1] 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.

Contents
Legal structure
History of mergers
Big Eight
Big Six
Big Five
Big Four
Revenue comparison
Criticism
Cartel fears
Tax avoidance
Market concentration
Corporate collusion
Global member firms
See also
References
External links

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,[2] the co-ordinating entity is a Swiss association, and in the cases of
Deloitte,[3] PricewaterhouseCoopers[4] and Ernst & Young,[5] 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 (Europe, the Middle East, India and Africa) 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.[6] There are rare exceptions to this convention; in 2007, KPMG announced a merger of four
internationally distinct member firms (in the United Kingdom, Germany, Switzerland and Liechtenstein) 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:

Arthur Andersen
Arthur Young
Coopers & Lybrand
Deloitte Haskins & Sells
Ernst & Whinney
Peat Marwick Mitchell
Price Waterhouse
Touche Ross

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.[7] Even now, Deloitte's
technical name is Deloitte Touche Tohmatsu Limited, which reflects its history of mergers.[8]
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:

Arthur Andersen
Coopers & Lybrand
Deloitte & Touche
Ernst & Young
KPMG
Price Waterhouse

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.[9][10] 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 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:[11]

Arthur Andersen
Deloitte & Touche
Ernst & Young
KPMG
PricewaterhouseCoopers

Big Four

Finally, the insolvency of Arthur Andersen stemming from their involvement in the 2001 Enron Scandal,
produced the Big Four:

Deloitte & Touche

Ernst & Young
KPMG
PricewaterhouseCoopers
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 (now known as EY) globally;
Deloitte & Touche in the United Kingdom, Canada, Spain, and Brazil; and PricewaterhouseCoopers (now
known as PwC) in China and Hong Kong.

Revenue comparison
Consulting
Revenue
Fiscal Revenues Audit & &
Firm Headquarters Employees per Tax Source
year (US$) Assurance Advisory
employee (Note)

$8.7
Deloitte UK/USA 2020 $47.6 bn 334,800 $142,174 $9.9 bn $29.2 bn F2020[12]
bn
$10.7
PwC UK/USA 2020 $43.0 bn 284,000 $151,408 $17.6 bn $14.7 bn F2020[13]
bn
$9.8
EY UK/USA 2020 $37.2 bn 298,965 $124,429 $12.8 bn $14.6 bn F2020[14]
bn
$6.6
KPMG Netherlands 2019 $29.75 bn 219,281 $135,671 $11.1 bn $12.0 bn F2019[15]
bn

Note: Consulting & Advisory includes the following service lines reported by each firm. Further, columns may not cross-add
due to rounding in numbers reported by each firm.

Deloitte: Consulting, Financial Advisory, Risk Advisory (2020 categories)

PwC: Advisory (2020 categories)
EY: Advisory, Transaction Advisory Services (2020 categories)
KPMG: Advisory (2019 categories)

Big Four Accounting Firm Revenues (US$ bn)