What are the Big 4 in Accounting

The Big 4 refers to the four biggest accounting firms globally, as measured by revenue. It used to be the Big 8 before a series of mergers and one spectacular collapse saw the number reduced by half.

The accountancy firms currently making up the Big 4 are Deloitte, EY (Ernst & Young), PwC (PricewaterhouseCoopers), and KPMG (Klynveld Peat Marwick Goerdeler). All four of them offer the usual auditing services provided by smaller accounting firms, although usually on a much larger scale. They also provide a wide range of tax, strategy and management consulting, as well as valuation, market research, assurance and legal advisory services.

They are able to offer this wide range of services because technically none of the Big Four are a single firm. Instead each is a professional network of firms that are owned and managed independently. However, each firm within each network has entered into agreements with the other firms in that network to operate under the same banner and brand. Each network comprising the Big 4 also shares intellectual property and quality standards. 

The majority of the Big 4’s clients are members of Standard and Poor’s 500 stock market index, which tracks the performance of the 500 largest companies in the United States, although they have many international clients as well.

History of the Big 4 accounting firms

For most of the 20th century, eight accounting firms dominated the industry. Those original Big 8 accounting firms were:

Arthur Andersen

• Arthur Young

• Coopers and Lybrand

• Deloitte Haskins and Sells

• Ernst & Whinney

• Peat Marwick Mitchell

• Price Waterhouse

• Touche Ross

The development towards today’s Big 4 began in the late 1980s, when two mergers created a Big 6. Ernst & Whinney merged with Arthur Young to form Ernst & Young (later stylised as EY), while Deloitte, Haskins and Sells merged with Touche Ross to form Deloitte and Touche. In the late 1990s, the Big 6 became the Big 5 when Price Waterhouse merged with Coopers and Lybrand to form PricewaterhouseCoopers (later stylised as PwC).

Five became four in 2001 after the insolvency of Arthur Andersen due to the firm’s involvement in the Enron scandal. The firm was indicted and convicted for obstruction of justice for shredding documents related to the audit of Enron’s finances, although the conviction was later overturned on a technicality. However, as the firm was not allowed to take on new clients while under investigation, its practices were sold off to the remaining members of what is now the Big 4.

The big 4 accounting firms

Measured by revenue, the largest of the Big 4 firms is PwC. It has its headquarters in London and employs more than 208,000 people. With revenues of well over $35 billion, it is considered the most prestigious of the Big 4.

Deloitte is not far behind, with its revenue only a couple of hundred million less than PwC’s. Its headquarters are in New York and it employs over 225,000 people. Although similar in revenue and employee numbers, one big difference between Deloitte and PwC is that the former has more of a focus on consulting while the latter’s main source of profit is financial auditing services.

EY also employs well over 200,000 people, but has a significantly lower revenue at just over $28 billion. This revenue comes from a balanced variety of services rather than any one particular focus. Its headquarters are also in London. 

KPMG is the smallest of the Big 4 and employs over 170,000 people. Its headquarters are in Amstelveen in the Netherlands, reflecting its more European-focused approach. Most of its approximate $24 billion revenue comes from auditing, consulting and advising.  

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