The term ‘Big Four’ refers to the world’s largest four professional services networks Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC). Their service repertoire ranges from offering audit, assurance, and taxation to management consulting, actuarial, corporate finance, and legal services.
The Big Four came into existence only in the late 20th century. Previously the market for professional services was dominated by eight big networks that were nicknamed the ‘Big Eight.’ These were Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskins and Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, and Touche Ross.
It was the gradual mergers between all these firms including the collapse of Arthur Andersen in 2002, that left the market being dominated by the ‘Big Four’ in the 21st century. Such was their market domination that in the year 2011, the United Kingdom reported that 99% of the companies in the FTSE 100 index and 96% of the companies in the FTSE 250 index were being audited by one of the Big Four firms.
All four firms are, in reality, professional services network that is owned and managed independently. Each of these independent entities has entered into agreements with the other member firms in the network, which, then, share a common name, brand, intellectual property, and quality standards. In an effort to coordinate the activities of the network, each one has established a global entity.
Of these four, Deloitte, PricewaterhouseCoopers, and Ernst & Young are registered as a UK Limited Company, whereas KPMG’s registration was under the co-ordinating entity of a Swiss association. Under Swiss law, it changed its legal structure to a cooperative in 2003. It was only in the year 2020, that KPMG became a UK-limited company.
Being market dominant for a number of years, the ‘Big Four’ have had their fair share of controversies and criticisms regarding their business practices and ethics, audit quality, tax avoidance, and alleged collusion amongst them. The Public Company Accounting Oversight Board (PCAOB) in the United States did an analysis in 2019 and reported that the ‘Big Four’ had mismanaged approximately 31% of their audits since 2009 with KPMG having the worst audit failure rate of 36.6%.
May 2018 saw KPMG being accused of complicity and signing off on Carillion’s inflated figures before the company finally collapsed. Two years later in 2020, PwC was facing allegations of a potential interest conflict in its audit of Sonangol as it played a dual role of consultant and auditor. The same year Deloitte was fined 15 million pounds by the FRC for failing to apply professional skepticism in its audit of Autonomy’s financial statements between 2009 to 2011 before it was acquired by Hewlett-Packard. Wirecard’s collapse in 2020 brought to light the poor auditing of Ernst & Young as it failed to discover the missing cash of 1.9 billion Euros.
The EY Split
The firm of Ernst and Young, one of the ‘Big Four’ may be heading for a split separating their accounting and consultancy businesses. A top EY official made the observation that this move will help pay the rising technology bills and might be copied by the other ‘Big Four’ firms.
In the event of a confirmed split, it would be the biggest in the sector since the collapse of Arthur Andersen. The firm of EY is worth approximately USD 50 billion. EY feels confident that the split will make it easier for the firm to raise capital to invest and create two more lucrative firms. The critics, on the other hand, are showing doubt and saying it may adversely affect the auditing side of the business.
Andy Baldwin, the Global Managing Partner of EY said that if the deal did not go through due to the currently unsettled financial markets, it could be voted on again at a later date. The fundamental drivers of the deal will remain unchanged. He went on to say “It may come to a timing point, so our plan is that we will continue to what we call soft separation next year, and continue to start to run these two businesses separately, albeit they will continue to be part of the single enterprise of EY.”
EY’s Big BreakUp Plans
The Effect on the Big Four
At the time of writing this article the other firms of the ‘Big Four’ have shown no public interest in a separation of powers. However, in the eye of governing bodies trying to sort out the potential conflicts in the global accounting giants and continue to exert pressure, the other firms may not be left with any other choice. Smaller accounting firms may now see a growth opportunity associated with the split.
If the time comes when the other ‘Big Four’ firms acknowledge the opportunities associated with the split, the fintech market will see unprecedented growth as automated accounting, spend management, and other fintech software will become an inseparable part and tool of the trade.
Conclusion
The CMA, in 2018, announced that it would launch a detailed study of the market dominance of the ‘Big Four’ in the audit sector. The UK Financial Reporting Council in July 2020, asked the Big Four firms to submit their plans to separate their audit and consultancy operations by 2024. However, with the EY split looming on the horizon, it seems it might very well be the beginning of a new chapter in the audit and consulting industry.
FAQs
Why are the Big Four accounting firms losing their dominance in the industry?
Big Four’s decline is caused by factors such as regulation, scandals, tech disruption, evolving client demands, and competition from smaller firms with specialized services and lower costs.
Is EY no more a part of the Big Four?
EY has announced that it will go ahead with splitting into its audit and consulting divisions into two separate companies.
The top executives of a company are some of the most important people for their business. The CEOs, CFOS and other executives are actually responsible for the overall success of a company, all the significant decisions are taken by them and they are the people that keep the business together. However, we all know ‘Teamwork makes the dream work.’ Apart from the executives being the brain of the company, the employees are also the heart and a business needs both for their survival.
An employee can be said to be the most important asset of an organization, they are the ones with whose help the proper functioning of a business can happen. Although, they are the subordinates of the top executives they are as important as them. Plus the executive’s behaviour in real life shows their actual character; their behaviour makes them the person they are. Recently, a few actions of some top executives with people of lower rank have created big controversies and they are on the end of receiving backlashes. Companies are surely suffering because of that, images of those companies are crumbling down and investors are now in turmoil about who to trust and who to not.
Therefore Investors now have decided to launch investigations to examine the behaviour of founders, CEOs and other executives of a startup in their daily lives. In this article, we will find out what has led to this situation and how investigations are conducted. So without any further ado, let’s get started.
“The way your employees feel is the way your customers will feel. And if your employees don’t feel valued, neither will your customers.” -Sybil F. Stershic
This entire situation started when an audio clip of Ashneer Grover, the co-founder of BharatPe was seen doing rounds on social media where it can be heard that Grover is insulting, threatening and abusing a bank employee. Although the co-founder of BharatPe denied the accusation, Kotak has decided to take legal action against Grover for hurling abuses and using inappropriate language while communicating with the bank’s employee.
A few days later an email exchange between Hashjit Sethi of Sequoia India came up where again Grover was seen using abuses while conversing with the former. Post this scenario, Ashneer Grover decided to take a leave of absence for two months.
Similar Past Incidents
The case of Ashneer Grover was not the first one and it is certainly not going to be the last, as similar incidents are surfacing recently. As we dwell deeper, there are instances where these types of the same situations have occurred in the past. Some of the incidents are:
The former CEO of Flipkart, Binny Bansal shocks the world when he resigns from his position after he faced allegations of serious personal misconduct in 2018, an investigation was conducted followed by the allegations.
In 2018, ICICI Bank’s then CEO and managing director Chanda Kochhar faced allegations of nepotism and multiple agency probes against her, this situation led to her quitting her job.
Another instance happened when Manu Sawhney, the CEO of ICC was instructed to go on leave when an investigation by a UK based agency happened where it shows his behavioural misconduct. He was allegedly behaved arrogantly and was firing employees without any proper reason plus he was also bullying many staff members. This led to an investigation and he was asked to go on leave.
In 2022, fashion E-commerce site, Zilingo suspended Ankiti Bose, the Chief executive and Indian founder of the E-commerce site for some alleged irregularities in the accounting part of the company. This has led to her suspension which is valid till 5th May 2022.
Why Investors are Investigating Top Executives?
The step was taken after the controversial situation of BharatPe’s Co-founder Ashneer Grover arose. Investors are now concerned so they are taking the help of investigating firms and forensic teams of known accounting companies to conduct an investigation on the behaviours of top executives. These things are done to make sure:
There will be no controversies regarding their behaviour which may lead to a bad image of the startup.
To decrease the chances of fraud-related issues in the company in the future.
Misbehaviour of top executives is actually a red flag for the investors that things might go wrong in the near future if they carry on with their behaviour. If a wrong executive is hired, it will harm the brand image of the company.
What Are the Important Things Investigators Are Investing?
A person behaviour’s toward their subordinates or the people who are of lesser rank shows the actual personality of a person. A startup depends on the hard work and the passion that can be found in the executives but its image also depends on the character of the key executives. The work culture of a company is extremely important. The key things of executives that are getting investigated are:
Their behaviour with their subordinates.
Their social media behaviour and if they are getting into petty arguments that are not necessary.
If they have any illegal substances with them or consume them.
If there is any traffic violation done by them.
Conclusion
Just because someone is in a higher position doesn’t mean that they have the right to misbehave with others. Being humble and kind is never a mistake; in fact, it gives a safe feeling to your subordinates that they are in the right company. Toxic culture will only lead to bad performance as well as a bad image of the . also helps in strengthening the brand image of the company.
FAQs
Why are investors investigating top executives?
After the Ashneer Grover controversy, many investors were worried about getting their brand image tarnished which led them to investigate top execs’ behaviour.
What are the things investigators are investing against the top executives?
Investors are hiring firms to investigate the behaviour of founders and top executives on social media and their behaviour towards their employees.
Auditing plays a pivotal role in the financial maintenance of a company. It can be seen as the analysis of a company’s accounts to ensure that it complies with the laws of the land, which is undertaken independently.
From small businesses to multi-national juggernauts, tracking and keeping records of all the financial activities is a challenging proposition. Audit firms have become an irreplaceable part of the modern business landscape. But why would one consult an audit firm? What does the cream of the crop offer for business? Read on to find out more.
Hiring an audit firm to go through the company’s account serves a wide range of purposes some of which are:
The main reason to conduct an audit of the company is compliance i.e. to meet the requirements and regulations of the industry. The risks involved with non-compliance far outweigh the cost and temporary inconvenience caused by an audit company.
A thorough audit gives an outsider’s view of the organization on the systems and controls, thereby providing a unique opportunity to identify flaws and improve on internal controls, business systems, efficiency, etc.
An audit gives an impartial verification of the financial position of the company this gives a sense of trust and confidence in the stakeholders and future investors.
Almost all industries are vulnerable to fraud and malpractices at different levels of administration. An audit can help the company to identify and effectively deal with these discrepancies.
An audit can help highlight the upcoming changes in company law, and taxation and ensure that the clients are prepared well in advance.
Performing audits at regular intervals can help improve the credit ratings of the business. Higher credit scores help the business to acquire new loans from the banks easily.
Top Audit Firms in India
Having understood the importance of hiring an audit firm to do the yearly object, let us explore some of the most popular audit firms in India.
Deloitte
Deloitte – Top Auditing Firms in India
Deloitte or Deloitte Touche Tohmatsu Limited is a professional network of services with offices in more than 150 countries in the world. Forming a part of the Big Four among auditing firms, it has the largest network of professional services networks in the world by the number of professionals working and revenue.
Founded by William Welch Deloitte in the year 1845 in London, Deloitte became a global player with mergers with industry leaders such as Touche Ross, Haskins & Sells. The firm is a United Kingdom private company, limited by guarantee and supported by a large group of independent legal entities. Notable employees of Deloitte include Sharon Thorne and Punit Renjen.
Founded in the late 1990s, Deloitte India has been an ever-present figure in the Indian auditing landscape. As per the regulation of the Institute of Chartered Accountants of India or the ICAI, foreign firms are not allowed to carry out audits in India. Deloitte operators under the name of C.C. Chokshi & Co. With more than eight offices Deloitte is located in four major cities:
PricewaterhouseCoopers or more commonly known as PwC is an international network of service firms operating under the PwC brand. Pwc is a part of the Big Four with Deloitte, EY and KPMG with offices in more than 157 countries. The majority of the workforce is located in the Americas and Asia accounting for 52 per cent of the total workforce
PwC was formed by a merger between Coopers & Lybrand with Price Waterhouse in September of 1998. The firm has associations with Booz & Company, BGT PArtners and NSI DMCC. Analogous to other professional service firms, each member firm of PwC is a financially and legally independent entity. Top employees include Sanjeev Krishan and Robert Mortiz.
Founded in 2008, Pwc has established itself in the Indian market. Spearheading community development projects such as The New Equations and the PwC India Foundations, the firm has been actively contributing to the development of society as a whole. With the headquarters in the nation’s capital of Delhi, some of the other locations are:
A part of the Big Four of accounting firms ever since its formation Ernst & Young Global Limited has one of the largest professional accounting service networks in the world. Similar to other major accounting firms, EY has expanded its markets into strategy, operations, human resources, technology and financial services consulting.
Ernst and Young is the result of several high profile mergers over the last 150 years, with Harding & Pullein being the oldest of these firms founded in 1848. Some of the other key mergers include Arthur Young & Co, Ernst & Ernst and the famous Whinney, Smith& Whinney. Carmine Di Sibio chairman and CEO of the firm is one of the many global leaders associated with EY.
Though EY cannot directly operate in India, one of its member firms S.R. Batliboi & Company has been auditing for more than 85 years now. The firm has been growing cumulative average rate of 45 per cent for the past four years in the country. EY in India is often called a one-man show owing to its dynamic and aggressive business leader Rajiv Memani. Ernst and Young have offices in several key states including:
A collaboration of British and Dutch professional services Klynveld Peat Marwick Goerdeler commonly known as KPMG forms one of the Big Four. Located in over 140 countries and employing over 200 thousand it has established itself as a leader in the global accounting arena.
First started in 1987 as a merger of Peat Marwick International and Klyneld Main Goerdeler the company experienced rapid growth throughout the decades. The oldest component, Grace Darbyshire & Todd was founded in 1818. In recent years KPMG has changed its United States branch as BearingPoint through an initial public offering. A key figure in the KPMG hierarchy is Bill Thomas the global chairman.
With the first branch opening in the August of 1993, the Indian branch of KPMG has seen a noteworthy presence in the company. KPMG has its presence in all major cities including:
In public accounting, taxation, and other business advisory services Binder Dijk Otte or BDO is establishing itself as an internationally recognised brand. BDO has an estimated income upwards of $10.3 billion and member firms in over 160 countries, thus making it one of the fastest-growing firms in the world.
With a comparatively shorter history as compared to other auditing firms, BDO was established in Australia in 1975. Having successful mergers with firms such as Nelson Parkhill and Horwath BDO growth has been rapid. Key names in the firm include founders Bernhard Binder, Hans Otte and the Global CEO Keith Farlinger.
BDO India is a key player in the global BDO organisation with over 3,500 employees operating nationwide. BDO offices are located in key cities such as:
A powerful and influential multinational accounting firm RSM International forms the 6th largest accountancy network in the world in terms of annual revenue. Headquartered in London, United Kingdom, RSM has generated approximately $6.3 billion as of 2020.
The history of RSM has its humble beginning in 1964 when it was a small network called DRM. The growth of the company was cemented in 1993 when it was rebranded by changing its name to RSM International. The founding members of Robson Rhodes and Salustro Reydel were absorbed by Grant Thornton and KPMG respectively. Ms Jean Stephens became the first CEO of the accounting firm in 2006 thereby making her the first female CEO of an international accounting firm.
RSM India Private Limited was incorporated on 08 February 2000. The company went on to have a merger with PWC in 2007 thus making the group the country’s largest accounting firm. RSM has a moderate presence in India with locations in important cities such as
Public accounting and consulting firm headquartered in London, United Kingdom, Baker Tilly International is the tenth largest accounting firm. Having an established presence in over 147 countries with 126 member firms the company recognizes member firms that operate in more than one country as one member.
Formed as a result of the merger of five firms in India Baker Tilly became the country’s sixth-largest firm. A notable merger in the company’s history came in August 2020 when Baker Tilly US merged with Squar Milner, LLP.
One of the leading accounting and consulting firms in India Baker Tilly DHC has been a strong presence in the land. Founded under the leadership of Mr Dilip B. Desai Baker Tilly acquired five smaller firms including R Kothari & Co, Spearhead Services to become a strong competitor to the Big Four.
Nexia International is an integrated network of independent services with more than 32,000 employees worldwide. Nexia also has the proud distinction of being one of the leading black-owned audit and advisory firms and among the top ten of international auditing firms networks.
Founded in the same year as the birth of the South African democracy in 1994, Necai grew rapidly to become the company’s top firm. In March 1998, the firm joined the international association SC International, which merged with Nexia International in 2006.
Nexia has offices located in several cities including:
Crowe Global is a global professional services network. Previously known as Crowe Horwath International it is the 9th largest global accounting network in terms of revenue. The firm consists of over 200 member firms in more than 120 countries.
Hungarian immigrants Ernest and Edmund founded Horwath & Horwath in New York, which will later go on to form Crowe Global. Initially focused on the hospitality industry the practice expanded to include accounting and auditing. With rapid growth from the 60’s Crowe Chizek became a member of the global Horwath & Horwath International Associates. The company was rebranded in 2018 to the network name Crowe across their independent member firms.
Crowe Global has its presence in India under the name of Crowe Advisory Services (India) LLP with offices in over 8 cities. The assurance and certification wing is provided by an independent accounting firm V.P. Thacker & Co. The firm has offices in 8 cities:
Auditing firms have become a quintessential part of the success of a business. Ever-growing business demands bring a unique set of challenges that require the third eye to solve. Auditing can often go a long way in saving the company large sums of money by spotting errors and providing solutions before it becomes irreversible. Audit firms can provide the support and guidance needed to lift any company to new and better peaks.
FAQs
What are the top audit firms in India?
Some of the top audit firms in India are:
Deloitte
PWC
Ernst and Young
KPMG
BDO
RSM
Baker Tilly
Nexia International
Crow Global
What are the Big 4 Indian accounting companies?
The big four accounting companies and top audit firms in India are:
Deloitte
PwC
EY
KPMG
How many audit firms are there in India?
There are more than 2000 audit firms in India.
Who is the No 1 chartered accountant in India?
Kumar Mangalam Birla is the most popular Chartered accountant in India.
What do auditing firms do?
Auditing firms check, verify and measure the accounts by an independent authority to ensure that all activities of accounts are done in a fairly. They ensure compliance with laws and regulations and maintain timely, fair, and accurate financial reporting.
Ria Puneyani
