[1] The four are often grouped because they are comparable in size relative to the rest of the market, both in terms of revenue and workforce; they are considered equal in their ability to provide a wide scope of 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 all offer audit, assurance, taxation, management consulting, valuation, market research, actuarial, corporate finance, and legal services to their clients.
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.
[2] Such a high level of industry concentration has caused concern, and a desire among some in the investment community for the UK's Competition & Markets Authority (CMA) to consider breaking up the Big Four.
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.
Until 2020, KPMG[4] was the only Big Four firm not registered as a UK private company, but rather the co-ordinating entity was a Swiss association (verein).
However, KPMG International changed its legal structure from a verein to a co-operative under Swiss law in 2003,[5] then to a UK limited company in 2020.
Ernst & Young also includes separate legal entities which manage its three geographic areas: the Americas, Asia-Pacific, and EMEIA (Europe, the Middle East, India and Africa) groups.
The firms' initial international expansion was driven by the needs of British and American based multinationals for worldwide service.
In 1932, Fortune published an article listing the 15 largest American CPA firms by number of public corporation clients.
After the Wall Street crash of 1929, numerous regulations were put into place by the federal government to ensure that investors were able to view accurate and detailed financial information.
Fortune published an article in the same year listing these firms along with their number of partners, offices, and estimated gross revenues.
Most of Arthur Andersen's international practices were sold to members of what is now the Big Four – notably EY globally; Deloitte in the United Kingdom, Canada, Spain, and Brazil; and PwC in China and Hong Kong.
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 they did not resulted in a loss of business.
[26] As per the Financial Reporting Council (FRC) none of the Big Four – Deloitte, EY, KPMG, and PwC managed to surpass the 90% target of its audits.
Multiple ethics scandals and questionable practices across the globe led to multi-million dollar fines and subsequent settlements by all the Big Four firms.
[39] 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.
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 other 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.
[43] The final report of a Parliamentary inquiry into the collapse of Carillion, published on 16 May 2018,[28] accused the Big Four accounting firms of being a "cosy club", with KPMG singled out for its "complicity" in signing off on Carillion's "increasingly fantastical figures" and internal auditor Deloitte accused of failing to identify, or ignoring, "terminal failings".
[45] 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.