Big Four Accounting Firms

Also known as: Big Four · The Big Four auditors · The Big 4 — the numeral styling trade press uses · The Big Four networks — the structural description, since none is a single firm · The final four — the tier's informal styling since Andersen's 2002 fall ended the Big Five

Business

Definition

The Big Four Accounting Firms — Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY), and KPMG — are the four largest professional-services networks in the world, the surviving tier of a consolidation that halved the profession’s top rank in a single generation: the Big Eight of the 1970s–80s (Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, and Touche Ross) became the Big Six in 1989, when Ernst & Whinney merged with Arthur Young and Deloitte Haskins & Sells merged with Touche Ross; the Big Five in 1998, when Price Waterhouse merged with Coopers & Lybrand as PricewaterhouseCoopers; and the Big Four in 2002, when Arthur Andersen collapsed in the Enron wreckage — its practices sold off, mostly to EY, Deloitte, and PwC. (Wikipedia — Big Four accounting firms) By the latest figures in the standard record the four networks together earn about US$219 billion a year and employ roughly 1.52 million people — Deloitte at US$70.5 billion, PwC at US$56.9 billion, EY at US$53.2 billion, and KPMG at US$39.8 billion. (Wikipedia — Big Four accounting firms)

None of the four is a single firm: each is a network of independently owned and managed member firms sharing a brand, a name, and quality standards, coordinated by a global entity — a structure with a precise Philippine expression. EY’s Philippine member practice is SGV & Co. (SyCip, Gorres, Velayo & Co.), the country’s largest firm and the auditor of about half the companies listed on the Philippine Stock Exchange as of December 2016; PwC’s is Isla Lipana & Co., “the oldest accounting firm in the country”; Deloitte’s services in the islands are “exclusively and independently provided by Navarro Amper & Co., a duly registered professional partnership in the Philippines”; and KPMG’s is R.G. Manabat & Co., “a Philippine partnership and a member firm of the KPMG global organization of independent member firms.” (Wikipedia — SGV & Co., PwC Philippines, Deloitte Southeast Asia — Manila, KPMG Philippines) The Philippine strand of the tier’s history — SGV’s Andersen years and its 2002 move to EY — is the story this wiki’s entries on Arthur Andersen, Ernst & Young, and SGV & Co. carry and this survey ties together. (Wikipedia — SGV & Co.)

Identities

Source Type	Identity
Wikipedia	Big Four accounting firms
Wikidata	Big Four (Q26788) — “international professional services networks” (verified this session)
DBpedia	Big Four accounting firms — label verified on the resource Big_Four_accounting_firms (verified this session)
ProductOntology	N/A
Wiktionary	Big Four — plural-only proper noun; the accounting sense defined as the four largest global auditing firms, Deloitte, EY, KPMG, and PwC (verified this session)
Library of Congress Subject Headings (LCSH)	N/A (LC authorities service unreachable this session)
MeSH	N/A
NCBI Taxonomy	N/A
AGROVOC	N/A
Google Scholar	Big Four accounting firms Deloitte PwC EY KPMG audit market concentration Big Eight Big Six Big Five consolidation 1989 1998 Arthur Andersen collapse 2002 member firm network structure Philippines SGV Isla Lipana Navarro Amper R.G. Manabat audit quality
ConceptNet	N/A (ConceptNet API unreachable this session)
OpenCyc	N/A

Also Known As

Big Four
The Big Four auditors
The Big 4 — the numeral styling trade press uses
The Big Four networks — the structural description, since none is a single firm
The final four — the tier’s informal styling since Andersen’s 2002 fall ended the Big Five

Examples and Analogies

From eight to four in fifteen years: the arithmetic of the tier — 1987’s Peat Marwick–Klynveld Main Goerdeler merger (KPMG Peat Marwick, “KPMG” from 1995), the two 1989 mergers, 1998’s Price Waterhouse–Coopers & Lybrand combination, and Andersen’s 2002 collapse — each step taking the count down and the survivors’ scale up. (Wikipedia — Big Four accounting firms)
A federation, not a firm: each “firm” contracts with clients and employs people through national member firms — in the Philippines, SGV & Co. for EY, Isla Lipana & Co. for PwC, Navarro Amper & Co. for Deloitte, and R.G. Manabat & Co. for KPMG — coordinated globally by UK-registered holding entities, with KPMG moving from a Swiss verein to a UK limited company in 2020. (Wikipedia — Big Four accounting firms, KPMG Philippines)
The Andersen lesson at both scales: the 2002 collapse taught the tier’s two lessons at once — globally, an audit firm can die of an audit failure (the shredding, the obstruction indictment, clients fleeing, practices sold); locally, a dominant franchise survives by moving — SGV distancing itself from Andersen and becoming an EY member practice on September 1, 2002. (Wikipedia — Big Four accounting firms, Wikipedia — SGV & Co.)
Verified organizational data:
The Big Eight (by 1980): Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, Touche Ross — auditing roughly 80 percent of United States SEC-listed companies by 1960 (Wikipedia — Big Four accounting firms)
The mergers: Peat Marwick + Klynveld Main Goerdeler (1987); Ernst & Whinney + Arthur Young (1989, Ernst & Young); Deloitte Haskins & Sells + Touche Ross (1989, Deloitte & Touche); Price Waterhouse + Coopers & Lybrand (1998, PricewaterhouseCoopers) (Wikipedia — Big Four accounting firms)
The fall: Arthur Andersen, indicted for obstruction of justice after shredding Enron audit documents; conviction later overturned, but clients fled and practices were sold — mostly to EY globally, Deloitte in the United Kingdom, Canada, Spain and Brazil, PwC in China and Hong Kong (Wikipedia — Big Four accounting firms)
Scale: Deloitte US$70.5 billion and 473,050 people; PwC US$56.9 billion and 364,000; EY US$53.2 billion and 406,209; KPMG US$39.8 billion and 276,030 — combined about US$219 billion and 1.52 million people (Wikipedia — Big Four accounting firms)
Philippine member firms: SGV & Co. (EY member practice since September 1, 2002; Andersen member firm 1985–2002; founded 1946 by Washington SyCip); Isla Lipana & Co. (PwC Philippines, the oldest firm in the country, offices in Manila, Cebu, and Davao); Navarro Amper & Co. (Deloitte, main office at Bonifacio Global City, Taguig); R.G. Manabat & Co. (KPMG, affiliated with KPMG International Limited) (Wikipedia — SGV & Co., PwC Philippines, Deloitte Southeast Asia — Manila, KPMG Philippines)

Usage Scenarios

1. Auditing the Listed Economy

The tier’s core function is independent assurance: globally it audits nearly all of the largest listed companies (99 percent of the FTSE 100 and 96 percent of the FTSE 250 in a 2011 count), and in the Philippines its member firms — led by SGV with roughly half the PSE’s listed auditees as of December 2016 — stand behind most of the market’s signed opinions. (Wikipedia — Big Four accounting firms, Wikipedia — SGV & Co.)

2. Contracting in the Philippines

A Philippine client of “Deloitte,” “PwC,” “EY,” or “KPMG” actually engages the local partnership — Navarro Amper & Co., Isla Lipana & Co., SGV & Co., or R.G. Manabat & Co., respectively — because the network’s global entities guarantee methodology rather than own the local practice; the audit opinion on a Philippine financial statement is signed in Manila. (PwC Philippines, Deloitte Southeast Asia — Manila, KPMG Philippines, Wikipedia — SGV & Co.)

3. Studying Audit-Market Concentration

Regulators use the tier as the concentration case: in the United Kingdom, MPs urged break-up studies and the Financial Reporting Council ordered the four to separate audit from consulting operations by 2024 — debates that travel to any market, including the Philippines’, where one member firm’s half of the listed board is the local expression of the global question. (Wikipedia — Big Four accounting firms, Wikipedia — SGV & Co.)

Strategies

Merge to reach scale: the 1987, 1989, and 1998 combinations were defensive as much as expansionist — the survivors of each round out-scaled the audit and consulting investments the losers could not match. (Wikipedia — Big Four accounting firms)
Federate the brand, localize the practice: one name and one standards system worldwide, with locally owned, locally regulated partnerships in each market — market access everywhere, liability contained everywhere, and the Filipino profession’s nationality rules accommodated. (Wikipedia — Big Four accounting firms, KPMG Philippines)
Absorb the fallen selectively: in 2002 the remaining networks took Andersen’s practices market by market — EY globally, Deloitte in the United Kingdom, Canada, Spain and Brazil, PwC in China and Hong Kong — the strategy this wiki’s Ernst & Young entry documents. (Wikipedia — Big Four accounting firms)
Sell assurance and advice, then defend the combination: consulting grew alongside audit until regulators forced the question; the 2020 UK operational-separation order and EY’s own failed Everest split — told in this wiki’s Ernst & Young entry — bracket the tier’s unresolved structure debate. (Wikipedia — Big Four accounting firms)

Security and Safety Measures

Assurance as the capital market’s safeguard: the tier’s core product is the independent audit on which listed-market trust runs — the function whose failure at Andersen produced the Sarbanes-Oxley era and whose protection is the standing regulatory objective, enforced network-wide through shared methodologies and quality controls. (Wikipedia — Big Four accounting firms)
Concentration as the measured risk: a 2019 PCAOB analysis found the firms “bungled” about 31 percent of audits sampled since 2009, with enforcement rare — the recorded reason regulators treat four-firm dependence on audit quality as a systemic exposure. (Wikipedia — Big Four accounting firms)
For researchers: distinguish the network (Deloitte, PwC, EY, KPMG) from the member firm (Navarro Amper, Isla Lipana, SGV, R.G. Manabat); date the tier 1989 (Six), 1998 (Five), 2002 (Four); and pair Andersen’s 2002 conviction with its 2005 reversal, as this wiki’s Arthur Andersen entry instructs. (Wikipedia — Big Four accounting firms, PwC Philippines, Deloitte Southeast Asia — Manila, KPMG Philippines, Wikipedia — SGV & Co.)

Historical Context

The tier was built by merger from a crowded top. Through the 1970s the profession’s first rank held eight names that had audited the great majority of American listed companies since mid-century; in 1987 Peat Marwick combined with the Klynveld Main Goerdeler group, and the two great mergers of 1989 — Ernst & Whinney with Arthur Young, Deloitte Haskins & Sells with Touche Ross — cut the rank to six. (Wikipedia — Big Four accounting firms) The 1998 marriage of Price Waterhouse and Coopers & Lybrand made it five, and the five of 2001 became the four of 2002 when Enron’s collapse exposed Andersen’s document destruction: indictment, conviction (later reversed), client flight, and sale of practices to the survivors completed the consolidation in a single year. (Wikipedia — Big Four accounting firms)

The Philippine thread runs through the same events. SGV & Co. — founded in Manila in 1946 by Washington SyCip and long the country’s dominant firm — became Andersen’s member firm in 1985 and, when Andersen fell, became an EY member practice on September 1, 2002, retaining the franchise that still audited about half the PSE’s listed companies as of December 2016. (Wikipedia — SGV & Co.) The other three seats of the local Big Four map to the surviving networks — Isla Lipana & Co. carrying PwC’s flag as the country’s oldest firm, Navarro Amper & Co. providing Deloitte’s services from Bonifacio Global City, and R.G. Manabat & Co. holding KPMG’s membership: four Filipino partnerships, four global networks, one tier. (PwC Philippines, Deloitte Southeast Asia — Manila, KPMG Philippines)

Challenges and Controversies

Concentration in the Audit Market

Four networks audit nearly everything large: 99 percent of the FTSE 100 and 96 percent of the FTSE 250 in the 2011 count, with UK banking covenants sometimes requiring a Big Four auditor outright — the exposure that has MPs and competition authorities repeatedly asking whether the tier can be broken, and whether any market should rest on four substitutes. (Wikipedia — Big Four accounting firms)

Audit Failures and Light Enforcement

The record includes KPMG’s Carillion certifications, EY’s missed €1.9 billion at Wirecard, Deloitte’s £15 million Autonomy fine, and PwC’s Sonangol conflict questions — against a 2019 PCAOB finding of about 31 percent “bungled” audits since 2009 with enforcement in only 6.6 percent of failure cases. (Wikipedia — Big Four accounting firms)

Tax-Avoidance Architecture

Described by one expert as “the masterminds of multinational tax avoidance,” the firms advise governments on tax reform while advising clients on avoiding taxes — the dual role the PwC Australia scandal dramatized. (Wikipedia — Big Four accounting firms)

The Cosy Club Problem

Revelations that the firms’ heads dined together regularly prompted an Australian competition inquiry and a UK parliamentary “cosy club” report after Carillion — the collegiality critics read as the quiet side of an oligopoly, answered in the UK by the 2020 operational-separation order. (Wikipedia — Big Four accounting firms)

The Philippine Concentration Question

In a small market the global question sharpens: SGV’s roughly half of the PSE’s listed auditees as of December 2016 — with the other Big Four local firms and the second tier taking the rest — makes Philippine audit concentration a live structural fact, the tension this wiki’s SGV & Co. entry documents from the firm’s side. (Wikipedia — SGV & Co.)