What is the Big Four?
Big Four refers to the top four accounting firms in the world that audit more than 80% of the US public companies and includes Deloitte, Pricewaterhouse Coopers, KPMG, and Ernst & Young. For these accounting firms, the term big 4 is used because of their huge size, good reputation and the worldwide reach in the field. Although these companies are usually identified as the single companies each one of these accounting firms actually has the network of different independent corporations who by entered into agreements work with each other with the decided quality standards and the common name.
List of Big Four Accounting Firms
There are four companies which fall under the category of big four which are as follows:
#1 – Deloitte
Deloitte is one out of four firms of the big four also known as the Deloitte Touché Tohmatsu Limited. The company is incorporated in the UK as an international firm for audit services. The company began its working as separate companies of four-person names as William Deloitte, Elijah Sells, Charles Haskins, and George touche out of which three companies merged and became Deloitte & Touche.
Presently the company primarily is known as Deloitte LLP having four subsidiaries named as Deloitte & Touche LLP, Deloitte financial advisory services LLP, Deloitte Consulting LLP, and the Deloitte Tax LLP. Over the period of time, Deloitte bought out many companies and created them as its subsidiaries or merged them and became one of the biggest firms of the world offering a wide range of employment opportunities. A person looking for the job in Deloitte can in any of the categories like consulting, taxes advisory, financial advisory services, etc.
#2 – Pricewaterhouse Coopers (PwC)
Another international firm out of four firms of the big four is the Pricewaterhouse Coopers. Headquarter of the Pricewaterhouse Coopers (PwC) is situated in London and was founded in the year 1849 by the Samuel Lowell price began. Large selection of the services is being offered by the Pricewaterhouse Coopers to their clients which includes auditing and assurance, consulting, tax-related matters, IFRS reporting, etc. All these offer a great opportunity to the current as well as the potential employees to work in different areas and find out their specialty within the same company.
#3- Klynveld Peat Marwick Goerdeler (KPMG)
KPMG is another international firm out of four firms of the big four also known as the Klynveld Peat Marwick Goerdeler. It was established originally in the year 1911 as at that time two companies merged and formed Peat Marwick. Three main services are being offered by the KPMG namely auditing, advisory services, and the taxes. These three services further can be broken in many of the sub-services and thereby making KPMG full-service firm. KPMG has a priority to build the culture which rewards high level of the performance and nurtures the talent.
#4 – Ernst & Young (EY)
Ernst & Young which is also sometimes referred to as EY, another international accounting firm out of four firms of the big four having the headquarters in London. EY was formed by the merger of the two companies namely Ernst & Ernst and the Arthur young and company in the year 1989. The company is located in various countries which counts to more than 150 have more than the 700 offices all over the world. They offer various services which include auditing and assurance, taxes matters, advisement, transactions, etc.
Advantages of Big Four
There are several different advantages of the big fours providing the opportunity for the clients, company, and employees. Some of the advantages are as follows:
- As various services are being offered by the big fours in different areas, it gives the opportunity to the employees and potential employees to work in the diversified areas and also they can find a specialty in working with the same company.
- These accounting firms provide different types of services to the clients, so the clients can avail the different services at the same place. Also as there is a large base of clients with these firms, they can provide more informed decision than others using their past experiences to their clients.
- Offering a wide range of services helps the company in catering a diverse group of the employees.
Disadvantages of Big Four
Apart from the advantages, there are limitations or the drawbacks of the big 4 which include the following:
- Despite the fact that they have various resources and the inside access to the companies, these big four giants were involved in the massive frauds which have caused huge pain to the shareholders of companies along with the investors of funds.
- Sometimes, these firms don’t ask too many questions and don’t report the suspected things in their report in fear of losing the clients.
Important Points of Big Four
#1 – Before the big 4 firms, for many of the years in the past, there were big eight firms which got reduced to the big four firms when the consolidations happened between the 1990s and the early 2000s. The consolidations which took place are as follows:
- Arthur young with the Ernst & Whinney.
- Price Waterhouse with the Coopers & Lybrand.
- Deloitte Haskins and sells with the touché ross Tohmatsu.
- On Arthur Andersen, many lawsuits for the audit malfeasance were put due to which it went out of business forcibly.
#2 – For many of the large public companies, auditing work is being performed by these big four firms.
Thus it can be concluded that the big 4 which also known as final 4, are the four largest accounting and the professional services firms having an international presence. For the majority of the public traded companies, auditing work is being performed by these big four firms. These include Deloitte, Pricewaterhouse Coopers, KPMG, and Ernst & young. Apart from these big fours, there are several other firms which provide a similar type of services but are small in comparison to them.
This has been a guide to what is the Big Four and its definition. Here we discuss big 4 accounting firms including Deloitte, Pricewaterhouse Coopers, KPMG, and Ernst & Young along with advantages and disadvantages. You can learn more about accounting from following articles –