Big Four accounting firms

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
Deloitte Touche Tohmatsu	$28.8bn	182,000	2011	United States Of America
Ernst & Young	$22.9bn	152,000	2011	United Kingdom
KPMG	$22.7bn	145,000	2011	Netherlands

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.

Legal structure

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.

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

The firms were called the Big 8 for most of the 20th century, reflecting the international dominance of the eight largest accountancy firms:

1. Arthur Andersen
2. Arthur Young & Co.
3. Coopers & Lybrand (until 1973 Cooper Brothers in the UK and Lybrand, Ross Bros., & Montgomery in the US)
4. Ernst & Whinney (until 1979 Ernst & Ernst in the US and Whinney Murray in the UK)
5. Deloitte Haskins & Sells (until 1978 Haskins & Sells in the US and Deloitte & Co. in the UK)
6. Peat Marwick Mitchell (later Peat Marwick, then KPMG)
7. Price Waterhouse
8. Touche Ross

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 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.

Big 6

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. 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

The Big 6 became the Big 5 in July 1998 when Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers.

Big 4

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, Spain 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. In 2011, PwC re-gained the first place with 10% revenue growth.

Mergers and developments

• (2001) Arthur Andersen
  • Developed from Andersen, Delany

• Ernst & Young (1989)
  • Arthur Young (1968)
  • Ernst & Whinney (1979)
    • Ernst & Ernst (US)
    • Whinney Murray (UK)
    • Whinney, Smith & Whinney

• PwC (2010)
  • PricewaterhouseCoopers (1998)
    • Coopers & Lybrand (1973)
      • Cooper Brothers (UK)
      • Lybrand, Ross Bros, Montgomery (US)
    • Price Waterhouse

• Deloitte Touche Tohmatsu
  • Deloitte & Touche (1989)
    • Deloitte Haskins & Sells (1978)
      • Deloitte & Co. (UK)
      • Haskins & Sells (US)
    • Touche Ross (1960)
      • 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 (1987)
  • Peat Marwick Mitchell (1925)
    • William Barclay Peat (UK)
    • Marwick Mitchell (US)
  • KMG
    • Klynveld Main Goerdeler
      • Klynveld Kraayenhof (Netherlands)
      • Thomson McLintock (UK)
      • Main Lafrentz (US)
    • Deutsche Treuhand Gesellschaft (Germany)

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.

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.

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. 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. 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.

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.

Global member firms

Country	Deloitte Touche Tohmatsu	PwC	Ernst & Young	KPMG
Argentina	Deloitte & Co. S.R.L	Pricewaterhouse & Co. S.R.L.	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	Deloitte Hua Yong	PricewaterhouseCoopers Zhong Tian	Ernst & Young Hua Ming	KPMG Hua Zhen
Egypt	Kamel Saleh	Mansour & Co.	Allied for Accounting and Auditing (Emad Ragheb)	Hazem Hassan
El Salvador	DTT El Salvador, S.A. de C.V.	PricewaterhouseCoopers El Salvador	Ernst & Young El Salvador, S.A. de C.V.	KPMG, S.A.
India	Deloitte Haskins & Sells, P C Hansotia, C C Chokshi & Co, S.B. Billimoria, M.Pal & Co., Fraser & Ross and Touche Ross & co and A.F Ferguson	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, Suherman & Surja	KAP Sidharta 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	Mancera S.C.	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
Taiwan	Deloitte.	PricewaterhouseCoopers Taiwan	Ernst & Young	KPMG
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

External links

• Frontpage of Deloitte Touche Tohmatsu Limited 2011
• Frontpage of Arthur Andersen website archived in 1996
• Frontpage of Coopers & Lybrand LLP website archived in 1996
• Frontpage of Price Waterhouse website archived in 1997