The sector's so-called Big Four” — Deloitte, EY, KPMG and PwC — have a long-established oligopoly to advise and monitor big business, experts say. The companies engage in a wide range of activities, from accounts auditing and strategy consulting to proposed mergers and acquisitions, restructuring and taxation.
However, a series of high-profile corporate collapses in Britain — including retail giant BHS in 2016 and construction company Carillion in early 2018 — have put them into the crosshairs of the authorities.
The Competition and Markets Authority watchdog launched a sector review in October and is expected to report back before Christmas.
“Firms need to placate financial markets and having a 'Big Four' badge is one easy way to do this,” Professor Crawford Spence at King's College London told AFP. “These symbolic aspects are very important.” The Big Four audit all but one of the 100 companies listed on London's benchmark FTSE 100 stocks index, media reports say. “This is partly explained by the need for big listed companies to have an auditor with an international network who can deal with subsidiaries overseas, partly with issues to do with brand,” added Spence.
“The Big Four ... pride themselves on trying to understand the whole business of a client, not just its audit issues. This 'rounded business knowledge' is very useful for big clients.” Yet the sector has seen its reputation tarnished in recent years, despite changes enacted since Enron's collapse in 2001, which experts say was the world's biggest accountancy scandal ever.
The Financial Reporting Council, which oversees the industry, fined PwC a record 6.5 million pounds in June over auditing failures of BHS, two years prior to its collapse.
KPMG meanwhile faces a FRC probe over its audit work for construction group Carillion, which went bust in January, amid concerns it may have breached ethical and technical standards.