DEFINITION of 'Big Four '

The Big Four are the four largest accounting firms in the United States as measured by revenue. They are Deloitte, Ernst&Young, PwC, and KPMG. Aside from auditing services, the Big Four offer tax, management consulting, valuation, market research, assurance and legal advisory services. They are a leading source of tax law interpretation and experts on changes in accounting and auditing standards.

BREAKING DOWN 'Big Four '

Through industry consolidation that began in 1989, what used to be the Big Eight has become the Big Four today. The eight, in alphabetical order, were Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskin & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse and Touche Ross — all U.S. or U.K. entities. Arthur Young combined with Ernst & Whinney and Deloitte Haskin & Sells merged with Touche Ross to reduce the group count to six. Price Waterhouse and Coopers & Lybrand then merged their practices making it five. Following the collapse of Arthur Andersen, where some individuals foolishly thought shredding Enron documents was a good idea, the five became the present day four.

Most of the auditing work for the largest public companies is performed by these firms. As of the end of 2017, the Big Four employed almost 1 million people in the aggregate, or an average of 250,000 employees per firm. According to their published reports, the average annual revenue was approximately $31 billion. With 360-degree views of companies and industries, the Big Four are authorities in business. They have extensive recruiting and training programs for fresh graduates, and sought-after passageways for tax and consulting professionals to and from many industrial sectors.

Critics of the Big Four

However, the Big Four is not without its critics. Despite all its resources and inside access to companies, these giants have not been the ones to uncover massive frauds that have caused the sharp pain to shareholders of companies and investors in funds. Enron and Worldcom were exposed by forensic accounting experts, not any of the Big Four. Critics say that the accounting firms do not want to ask too many tough questions of their paying clients or too assiduously investigate something suspicious in their books. That would be tantamount to biting the hand that feeds you.

RELATED TERMS
  1. Auditability

    Auditability describes the ability to achieve accurate results ...
  2. Accountant's Letter

    An accountant's letter is an auditor's written statement attesting ...
  3. Enron

    Enron was a U.S. energy-trading and utilities company that perpetuated ...
  4. Continuous Audit

    Continuous audit is an internal process that examines accounting ...
  5. Offshore Portfolio Investment Strategy ...

    Offshore Portfolio Investment Strategy (OPIS) was a fraudulent ...
  6. Management Audit

    A management audit is an analysis and assessment of competencies ...
Related Articles
  1. Insights

    Opinion: Make Accounting's Big Four Accountable

    The latest accounting world scandal at KPMG is a symptom of a much deeper sickness in how the Big Four do business. There is a cure.
  2. Investing

    A Day In The Life Of An Accountant

    An analysis of the accountant profession, who becomes an accountant, what they do, where they work, and salary ranges.
  3. Personal Finance

    Common Interview Questions for Internal Auditors

    Identify some of the most common questions asked during internal auditor job interviews, and learn the best responses to put you ahead of your competition.
  4. Personal Finance

    A Day In The Life Of An Auditor

    If you like the idea of examining and attesting to a company's financial performance for a living, a career in auditing might be right for you.
  5. Insights

    Arthur J. Gallagher Keeps Serial Deal Pace (AJG)

    Arthur J. Gallagher was busy over the first two weeks of 2017 acquiring two companies and promoting two executives in the employee benefits division.
  6. Personal Finance

    Career advice: Accounting versus auditing

    Understand the distinctions between accounting and auditing, and learn what each offers new graduates in terms of salary, job security and daily life.
  7. Insights

    How The IRS Works: Functions & Audits

    Even the most enlightened citizen curses taxes, possibly while simultaneously acknowledging that they're the price of a civilized society.
  8. Tech

    Big Data in Financial Services Comes With Some Risks

    Big data is playing a larger role in finance but its application does not come without risks.
  9. Financial Advisor

    SEC Audit? No Problem (If You're Prepared)

    Audits are unwanted and unpleasant, but by getting your proverbial ducks in a row ahead of time you can ease and simplify the process.
  10. Personal Finance

    Career advice: Accounting versus law

    Identify the key differences between working in accounting and working in law and understand which specific skills make you better-suited for each career.
RELATED FAQS
  1. Can the IRS audit you after a refund?

    Learn how the U.S. Internal Revenue Service (IRS) can conduct a tax audit even after a taxpayer was issued a tax refund in ... Read Answer >>
  2. What are some examples of inherent risk?

    Defining the nature of inherent risk in preparing and executing financial audits, and explaining its prevalence in the financial ... Read Answer >>
  3. What is cost accounting?

    Learn about the main benefits of cost accounting systems, how they are different from financial accounting and why they are ... Read Answer >>
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center