For many years, the global accounting industry has been top-heavy, dominated by a small number of large and powerful firms. Over time, the largest accounting firms in the world underwent a series of mega-mergers, concentrating the industry even more.
In 1989, there were eight mega-accounting firms, all based in the United States or United Kingdom and known as the 'Big Eight'. They included:
- Arthur Andersen
- Arthur Young
- Coopers & Lybrand
- Deloitte, Haskins & Sells
- Ernst & Whinney
- Peat Marwick Mitchell
- Price Waterhouse
- Touche Ross
Arthur Andersen collapsed due to its role in the Enron scandal. The others? Mergers cut the Big Eight down to the Big Four:
- Arthur Young and Ernst & Whinney combined to form Ernst & Young.
- Deloitte, Haskins & Sells merged with Touche Ross and became known simply as Deloitte.
- Price Waterhouse and Coopers & Lybrand combined and are now known as PricewaterhouseCoopers (PwC).
- Netherlands-based KMG merged with Peat Marwick Mitchell to form KPMG International.
Because there is a massive gap in size between the four and any other competitors, they are collectively called the 'Big Four'.
The Big Four accounting firms
According to the International Accounting Bulletin, the Big Four have a combined 74% share of the global accounting market.1 Here's some general information about each one.
Deloitte
Founded in 1845 in London, Deloitte has operated in the US since 1890 and has grown both organically and through a series of acquisitions over the years. In 2020, Forbes magazine named Deloitte the third-largest privately owned company in the US. In 2023, it generated US$64.9 billion in revenue.2 The company employs about 457,000 people3 and provides a range of services such as consulting, financial advising, risk advising, tax, and legal services.
Ernst & Young
Ernst & Young traces its roots back to 1849 through predecessor companies. Still, the company's current form originated in 1989 when Ernst & Whinney merged with Arthur Young & Co. Like Deloitte, Ernst & Young is based in London but has operations globally. The company is slightly smaller than Deloitte but is still a massive operation. Ernst & Young is the seventh-largest private company in the US. It has almost 400,000 employees4 and generated US$49.4 billion in revenue in 2023.5
KPMG International
KPMG is headquartered in Amsterdam but is incorporated in the UK. Its name stands for Klynveld Peat Marwick Goerdeler, the surnames of the founders of the predecessor companies, which date back to 1897 in one case. The current form of the company originated when KMG merged with Peat Marwick in 1987, which was considered to be the first "mega-merger" of large accounting firms. KPMG employs 273,500 people6 and produced almost US$36 billion in revenue in 2023.7
PricewaterhouseCoopers
PricewaterhouseCoopers (PwC) was formed by the 1998 merger of Price Waterhouse, which has been around since 1849, and Coopers & Lybrand, which was founded in 1854. The third London-based firm of the Big Four, PwC is the second-largest by revenue and the third-largest by employees, with US$50.3 billion in revenue in FY23 and 328,000 employees, respectively.8
It's important to note that none of the big four is actually a single accounting firm. Technically speaking, they are each a network of many different independently operated firms.
What do the big four accounting firms do?
While the exact scope of services may vary slightly, the four firms essentially do the same things. They all offer services including:
- Audit – Ensuring that business books are kept accurate and up-to-date.
- Assurance — Independent verification of financial information.
- Tax – Consulting services, tax compliance, and tax law interpretation.
- Management consulting
- Actuarial services — Managing risk using mathematical and statistical methods
- M&A advisory services
- Market research
- Legal services
- Risk advisory
- Corporate finance
- Other forms of consulting
Why it matters to investors
The accounting firms are all private companies but regularly provide services to publicly traded companies. For example, most public company audits are conducted by one of the Big Four accounting firms, and they are generally considered the authority on new accounting standards, tax law interpretation, and more.
- Additional reporting by Motley Fool Australia contributor Kate O'Brien
Frequently Asked Questions
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Determining which of the Big 4 accounting firms is the best is subjective and depends on various criteria, including the client's specific needs and preferences, the firm's expertise in a particular industry, its global reach, and its reputation. Each of the Big 4 – Deloitte, PwC, EY (Ernst & Young), and KPMG – has its own strengths and areas of specialisation.
Deloitte is often recognised for its extensive global network and leadership in consulting services, PwC is well-regarded for its expertise in audit and assurance, EY is known for its strong tax advisory services, and KPMG is notable for its work in audit and tax. Thus, the 'best' firm would vary depending on the specific services a client requires, the industry they operate in, and the geographic locations of their business operations.
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In Australia, the Big 4 accounting firms are Deloitte, PwC, EY, and KPMG. These firms serve many public and private Australian companies, leveraging their global networks to provide comprehensive services tailored to the Australian market. Each firm has multiple offices nationwide to cater to diverse client needs.
Each of the big four has a longstanding presence in Australia. Deloitte can trace its Australian origins back to 1891, when it opened its first office in Sydney. Both of PWC's predecessor firms (Price Waterhouse and Coopers & Lybrand) operated in Australia prior to their merger in 1998. EY's growth in Australia was marked by the merger of several local accounting firms into the global Ernst & Young network in the 1980s and 1990s. Peat Marwick, one of the predecessor firms of KPMG, opened its first office in Australia in 1897.
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The term 'Big 4' refers to the four largest international accounting and professional services firms. It used to be the Big 5, but the number was reduced to four after the demise of Arthur Andersen in 2002 following the Enron scandal. Since then, PWC, EY, KPMG, and Deloitte have dominated the industry, offering audit, assurance, tax, consulting, advisory, actuarial, corporate finance, and legal services worldwide. The transition from Big 5 to Big 4 marked a significant consolidation in the industry, and the term Big 4 has remained relevant in describing the leading firms in the accounting and professional services sector.
