The Big 4 Exploration Series




An Introduction

For much of the planet, bolstered by an expansion far beyond the bustling metropolises of the developed world, the “Big 4” accounting firms (which are in a sense neither firms nor fully based in accounting, but we will get to that later), are symbolic pillars of economic development.

There are many who argue the four accounting giants, which collectively possess an army of human capital that consistently tops 880,000 and revenue that eclipses $127 billion, not only occupy the mantle of accounting, but are competitive on an industry-blind, cross-border platform with the largest companies in the world. Big4Revenue


The foundation of this series isn’t to consent, dissent, or even dissect the validity of their placement among global companies, but to acknowledge the Big 4 has overwhelming influence in its respective areas of business that transcends its literal and figurative, internal walls. Many of our readers are likely among those that diligently track Big 4 endorsed developments and their related opinions on the subject matter.

To help reduce the burdensome load of our readers, you’ll find us here weekly, analyzing Big 4 positions on a wide array of topics. They will range from the new revenue recognition standard to blockchain, and from regulatory agencies to the evolved audit report. Our series will serve to inform our readers of current and upcoming accounting content by detailing issues and offering a Big 4 position on them. If the issue is controversial we will provide the counter-evidence and offer up our own opinion. The mission is not to tell our readers what to think, but to provide them with the tools to reach their own conclusions.

To begin the series, here is a brief history of the Big 4…

An Origination

“If you can’t beat them, join them.” The proverb adeptly describes the culmination of the Big 4, which similar to other industries, was heavily dependent on the use of mergers and acquisitions. Eight firms (Arthur Andersen, Coopers and Lybrand, Ernst and Whinney, Deloitte Haskins & Sells, Peat Marwick Mitchell, Price Waterhouse, Touche Ross, and Arthur Young), stood for the better part of the twentieth century. In 1989 it was reduced to six when Ernst & Whinney merged with Arthur Young to form Ernst and Young (EY) and Deloitte Haskins, & Sells later merged with Touche Ross to form Deloitte & Touche.  In 1998 only five remained when Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers (PwC). The evolution of the Big 5 to the Big 4 is perhaps the most well-known and controversial. The Enron scandal forced Arthur Andersen into bankruptcy in 2002 and gave rise to the Big 4 in its current form: Deloitte, EY, PwC, and KPMG.

Pseudo Firms and Quasi Accounting

Despite the quantity of analysis that encompasses virtually everything Big 4 related, it is rarely mentioned that the Big 4 accounting firms aren’t really firms in the technical sense, but professional service networks that have consented to operate under a single name and through an organized framework. In simple terms, Deloitte India is a legally separate and independent entity from Deloitte UK, and EY Bangladesh from EY (US).

The reasons for this separation can be debated, but in EY’s own words:

“In many parts of the world, accounting firms are required by law to be locally owned and independent. Although regulatory attitudes on this issue are changing, PwC member firms do not and cannot currently operate as a corporate multinational.” 

Under this decentralized platform the Big 4 have seen copious, annual year over year revenue growth.

Finally, while the Big 4 were originally accounting and tax based, it is the external sectors which have fueled new revenue streams over the past decade. Consider that in all probability Deloitte’s consulting revenue will overtake its audit share in the near future ($400 million short in 2016) and that the Big 4 talent search often heads to Silicon Valley, in addition to traditional accounting meccas, to find the “new-age” accountant.

Accounting is changing faster than the “Iron Throne,” and it stands to reason that the modern day drivers of the profession will lead the future transition.

We’ll be there, every step of the way. Welcome to the birth of the Big 4 Exploration Series.