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The Secrets of the Big Four Accounting Firms: How They Became Global Powerhouses
Every investor and business decision maker is familiar with the Big Four accounting firms, which not only influence the standards of financial auditing, but also shape the environment in which global business operates. Deloitte, EY, KPMG and PwC are undoubtedly the leaders in the professional services network. With their deep professional background and resources, they enjoy an unparalleled position in the accounting industry. However, what are the secrets behind these four giants?
"The influence of the Big Four accounting firms is omnipresent. Every decision they make may change the direction of the market."
Historical Origin and Development
The history of the Big Four accounting firms dates back to the early 20th century, when the market was dominated by eight major accounting firms, including ARN, Arthur Young, Coopers & Lybrand, Deloitte Haskins and Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse and Touche Ross. The industry underwent rapid change in the late 20th century as business expanded and large-scale mergers emerged, culminating in today's Big Four accounting firms.
Legal structure and operating model
Legally, the Big Four accounting firms do not constitute a single corporate structure, but are composed of independently operated professional service networks. Each company has an independent legal status in its respective country and operates according to local regulations. This law firm-like operating model ensures that each member company can provide professional services based on market demand and legal requirements.
“These networks are not seeking mutual ownership, but rather collaborating to share brands and quality standards.”
Market advantages and challenges
According to market reports, the Big Four accounting firms collectively have 67% of the global accounting industry market share. This not only reflects their monopoly position in the market, but also raises concerns among regulators about their possible monopolistic behavior. The UK's Competition and Markets Authority has even considered breaking up these giants to promote fair competition in the market.
Quality and ethical challenges
The success of the Big Four accounting firms is not without controversy, however. Recent reports have pointed out that these companies have performed poorly in terms of audit quality and ethics, sparking criticism and concern in the market. In particular, firms such as KPMG, PwC and Deloitte have been fined for failing to act in certain key deals, prompting calls from some senior figures for tighter regulation.
“At a time when the audit profession is under increasing scrutiny, the latest audit quality results are unacceptable.”
Future challenges and opportunities
Faced with an ever-changing market environment, the Big Four accounting firms must adapt to new challenges, including technological innovation, growing client expectations, and stricter regulatory requirements. They are also working to improve audit quality and adherence to ethical standards. Against this backdrop, whether the Big Four can maintain their position as industry leaders becomes an important issue for the future.
"Amidst the great changes in economy and technology, the choices made by the Big Four may determine the future direction of global business."
How do the Big Four accounting firms recognize their own responsibility process and how can they maintain their quality and credibility in the technology-driven transformation? This will be a key issue in the future and is worthy of our deep consideration?
