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Research Assessment #7

Patrick Flaherty

24 January 2018

Kolakowski, Mark. “Big 4 Elite Public Accounting Firms.” The Balance, 20 Mar. 2017,

www.thebalance.com/big-four-public-accounting-firms-1287328.

Assessment:

The Big Four Public Accounting Firms are known throughout the world of finance. These

prominent forces have not always been exactly as they are, thus they will not likely remain the

same forever. Whether you are interested in working at one of them for your whole career or not,

any experience (internships even) is excellent for your resume.

First of all, who are the Big Four? Currently, the firms are Deloitte, KPMG, EY, and

PwC. All are based out of the UK except for KPMG, which is based out of the Netherlands.

These four accounting firms have a combined annual revenue exceeding $100 bn and employ

close to one million people.

Originally, there were more than four big accounting firms. Through the years, the “Big

Eight” reduced to six, five, and four. This was mostly accomplished through mergers and

acquisitions, but also due to scandal. Arthur Andersen was one of the “Big Five” until the Enron

scandal caused its dissolution. Enron was a company that dealt with natural gas, and had corrupt

leaders that hid billions of dollars in debt. Arthur Andersen was complicit in the conspiracy, and

fell from glory as Enron went bankrupt.

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The Big Four serve the largest publicly traded companies among many other clients.

They perform audits and provide accounting services in order to certify the accuracy of the

companies’ financial statements. The standards are the Generally Accepted Accounting

Principles in the USA, but there is an entirely different (and sometimes more rigorous) standard

in Europe.

Some non-profits are also served by the Big Four, but usually only the largest and most

prominent require that scale of audit. Although rare, the Big Four has some individual clients.

These individuals are the super-wealthy; they have more money than most institutions, so they

can only be served by accounting organizations of massive size.

The Big Four were founded with the intention of consulting being one of the biggest

sections, but it ended up making up only ⅓ of the revenue. The ties to consulting do make the

firms veritable experts in information technology, and they are called to help with mergers and

acquisitions as well as financial strategy for business.

After the first semester, I decided to focus in on accounting for my topic. I am

particularly interested in the Big Four Accounting firms, especially since both professionals I had

asked to be my mentor had spent time at one of them. My current plan for after high school is to

go to a good school for a five year accounting and finance program or to go to a decent school

for my undergraduate and a great school for my MBA. The goal would be to work at one of the

Big Four right out of college and either stay and work my way up to be a partner or leave and

join a private equity or hedge fund firm.

The information about the Big Four has allowed for me to think about what would make

me stand out as an applicant. I think that a strong final product will help get me into an excellent

accounting school and even help me land a decent first out-of-college job at one of the firms. I
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do not have any new ideas for a project from this research, but I do have a better idea of what I

should be expecting at a big firm.

The Big 4 Public Accounting Firms

The Big Four public accounting firms are the leading purveyors of accounting and auditing
services worldwide. Their core clientele includes the largest publicly traded companies, and their
primary activity is the certification of those companies' financial statements for accuracy,
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including conformity with Generally Accepted Accounting Principles (GAAP) in the U.S. and
equivalent standards in other countries.

As with smaller public accounting firms, the Big Four also count nonprofit organizations and
individuals among their clients, for whom the preparation of tax returns is a major activity.
However, just as the Big Four tend to deal with only the largest for-profit companies, the
nonprofits among their client lists normally also are quite large and wealthy. As for individual
clients, they invariably are ultra high net worth people whose assets are so vast that they are
practically of institutional size and sophistication. Family office services are typically on offer to
these ultra-wealthy individual clients.

The total revenue of the Big Four, as a group, exceeded $123 billion in 2015. Despite their size,
they are organized as partnerships rather than as corporations.

Consulting
Big Four business consulting services are a large and growing part of these firms' service
offerings -- as much as 33 percent of total revenue.

Originally conceived as an adjunct to their core auditing and tax preparation services, Big Four
consulting traditionally has focused on the design and implementation of accounting systems and
processes, making them major players in the information technology field. Over time, Big Four
consulting has become increasingly likely to extend into more strategic areas, such as merger and
acquisition analysis, or general business strategy.

The consulting practices in Big Four firms normally are organized separately from their core
auditing functions and have different management structures. Up or out policies, for example, are
much more likely to be found in their consulting practices than in audit. Nonetheless, some
engagements might require the assembly of cross-functional teams consisting of both audit and
consulting personnel.

Membership
The Big Four include:

1. Deloitte
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2. EY

3. KPMG

4. PwC

The Big Eight

Before there was a Big Four, for many years there was a Big Eight. These consolidations, from
the 1990s through the early 2000s, reduced the Big Eight to the Big Four:

Deloitte Haskins & Sells merged with Touche Ross Tohmatsu

Arthur Young merged with Ernst & Whinney

Price Waterhouse merged with Coopers & Lybrand

Arthur Andersen was forced out of business by expensive lawsuits alleging audit malfeasance,

notably in the Enron and WorldComm scandals of 2002.

The eighth firm was Peat Marwick Mitchell, which merged with KMG in 1987 to form the Big

Four firm KPMG

Alternative Names
The Big Four often go by several similar, but slightly different names, depending on the
preferences of the writer. These include, for example:

● Big Four Public Accounting Firms

● Big 4 Public Accounting Firms

● Big Four Accounting Firms

● Big 4 Accounting Firms

● Big Four Accounting and Auditing Firms

● Big 4 Accounting and Auditing Firms

● Big Four Auditing Firms

● Big 4 Auditing Firms

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● Big Four Public Accounting and Auditing Firms

● Big 4 Public Accounting and Auditing Firms

Whatever variation you might see, the same four firms are being referenced.

Bottom Line for Financial Careers

Even if you do not intend to pursue a long career within public accounting or consulting, a period
of service in the Big Four, including an internship, can be a valuable enhancement to your
resume, whatever your future career path, given the prestige of these firms. The Big Four are
major developers of talent within the financial services industry and important trainers of future
managers in all industries, both in the financial sector and in general management.

Best Companies Lists

Also, note that the Big Four regularly appear on lists of the best companies to work for and the
best companies for working moms. Regarding the working moms ranking, the Big Four are cited
for offering flexible hours and telecommuting options.