:max_bytes(150000):strip_icc()/bigfour-0e7f1f82c9294d788286e4a66b7f06ee.jpg "What Are the Big 4 Accounting Firms? Definition and Critique")
What Are the Big Four Accounting Firms?
The Big Four are the four largest global accounting firms—Deloitte, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and Klynveld Peat Marwick Goerdeler (KPMG), as measured by revenue.
Aside from auditing services, the Big Four offer tax, strategy and management consulting, valuation, market research, assurance, and legal advisory services. They are the leading source of tax law interpretation and experts on changes in accounting and auditing standards.
The Big Four also offer digital transformation consulting to serve the needs of companies in the digital age.
Key Takeaways
- The “Big Four” refers to the four largest accounting firms in the U.S.
- The largest accounting firms used to comprise the “Big Eight,” but mergers and closures have reduced the number of top-tier companies.
- These four firms audit the financial statements for the vast majority of publicly held companies.
- In addition to their auditing services, the Big Four provide tax, consulting, valuation, market research, assurance, and legal advisory services.
- Jobs at the Big Four firms are highly competitive and difficult to get; the busy season is often more strenuous compared to other public accounting firms.
Understanding the 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, while Deloitte Haskin & Sells merged with Touche Ross to reduce the group count to six. Then, Price Waterhouse and Coopers & Lybrand merged their practices, making a total of five. Following the collapse of Arthur Andersen, due to its proven culpability in the Enron scandal, the five became the present-day four.
The Big Four consulting firms perform most of the auditing work for some of the largest public companies in the world. In fact, the vast majority of Fortune 500 companies have their financial statements audited by one of the Big Four.
Big Four clients include such corporate powerhouses as Berkshire Hathaway, Ford Motor Co., Apple, Exxon Mobil, and Amazon. According to a 2018 report by the CFA Institute, 30% of the S&P 500 was audited by PwC, 31% by EY, 20% by Deloitte, and 19% by KPMG. In 2022, the Big Four continued to provide SEC audits to a large majority of publicly held companies.
With 360-degree views of companies and industries, the Big Four are authorities in the accounting industry. They have extensive recruiting and training programs for fresh graduates and offer prized conduits for tax and consulting professionals to and from various industrial sectors.
Each Big Four firm is a composition of individual professional services networks rather than a single firm. Each of these networks is owned and managed independently, having entered into agreements with other member firms to share the same name, brand, and standards.
Deloitte LLP
The largest of the Big Four, Deloitte’s workforce grew to over 457,000 employees during their 2023 fiscal year. The company’s annual revenue was $64.9 billion. It exceeded $50 billion in revenue for the first time in 2021, growing 5.5% from prior-year revenue. Worldwide, Deloitte operates in 150 countries.
PwC
In 2023, PwC reported an annual revenue of $53.1 billion, the second-highest amount for Big Four firms, up 9.9% (in its local currency) from the previous year. Revenue in the United States increased 5.6% from 2022. PwC also added 36,000 more jobs during the year, boosting its workforce to more than 364,000 in 152 countries.
It also made a $3.7 billion investment in talent and business acquisitions to grow its expertise in cloud and technology consulting and scale its artificial intelligence capabilities.
EY
During its fiscal year 2023 (ending in June), Ernst & Young reported roughly $49.9 billion of company-wide revenue, an increase of 14.2% from the year prior. According to EY’s media relations director, Rachel Lloyd, this marks one of the firm’s most successful in its history.
EY announced a $10 billion, three-year investment in company expansion in an attempt to reach more clients and more successfully navigate their needs in 2021. This investment activity continued through 2023, seeing the company roll out an artificial intelligence platform and an AI assistant with a language model capable of conversing with users to assist with creating ideas and research.
At the end of fiscal year 2021, EY reported having 395,442 on staff. The firm operates in 150 countries.
KPMG
In its fiscal year 2023, KPMG reported the equivalent of $36 billion of revenue with strong growth across multiple divisions. KPMG employs over 273,000 individuals across the world. It has an office in every state across the U.S. and operates in 143 countries.
Arthur Andersen and Enron
In 2002, “Big Eight” firm Arthur Andersen was discovered to have shredded documentation in an effort to hide Enron’s falsified financial numbers. One of the largest and most reputable firms at the time, it ultimately collapsed due to the scandal.
| 2023 Annual Revenue in U.S. Dollars | # of Employees | # of Countries of Operation/Headquarters | |
|---|---|---|---|
| Deloitte | $64.9 billion | 457,000 | 150/London, UK |
| PwC | $53.1 billion | 364,000 | 152/New York City, U.S. |
| EY | $49.9 billion | 395,442 | 150/London, UK |
| KPMG | $36 billion | 273,000 | 143/Amstelveen, Netherlands |
Criticism of the Big Four
The Big Four is not without its critics. Despite all their resources and inside access to companies, these giants have not been the ones to uncover massive frauds perpetrated by clients that have caused pain for shareholders and investors. For example, Enron and Worldcom were exposed by forensic accounting experts, not their accounting firms.
Critics say that these accounting firms do not want to ask tough questions of their paying clients or assiduously investigate something suspicious on their books. That would be tantamount to biting the hand that feeds you.
Salaries at the Big Four
While salaries change with time and economic circumstances, here are some average annual U.S. salaries for various positions at each of the Big Four accounting firms, as reported by Indeed.com.
Deloitte
- Tax Analyst: $72,176
- Accountant: $70,691
- Certified Public Accountant: $88,300
- Auditor: $76,637
- Business Analyst: $84,836
- Cybersecurity Analyst: $94,077
- Source: Indeed.com
PwC
- Tax Analyst: $74,041
- Accountant: $62,737
- Certified Public Accountant: $90,380
- Auditor: $77,573
- Business Analyst: $68,049
- Cybersecurity Analyst: $96,000
- Source: Indeed.com
EY
- Tax Analyst: $47,425
- Accountant: $85,478
- Certified Public Accountant: $80,641
- Auditor: $74,117
- Business Analyst: $64,295
- Cybersecurity Analyst: $88,172
- Source: Indeed.com
KPMG
- Tax Analyst: $76,509
- Accountant: $80,896
- Certified Public Accountant: $84,066
- Auditor: $67,216
- Business Analyst: $40,431
- IT Security Specialist: $114,678
- Source: Indeed.com
What Is the Biggest Big Four Accounting Company?
With $64.9 billion of revenue earned during its 2023 fiscal year, Deloitte is the largest of the Big Four firms.
What Services Do Big Four Companies Provide?
Each Big Four company has a diverse staff armed with varying levels of expertise to meet their client’s needs. In general, Big Four firms all provide audit, assurance, consulting, financial advisory, risk management, and tax compliance services. Each firm also assists with mergers, acquisitions, corporate restructurings, and forensic accounting.
What Is Busy Season Like at a Big Four Company?
The busy season typically means long hours of auditing or tax compliance work to meet reporting deadlines for clients. Big Four employees often work much longer hours during the busy season, sometimes doubling the hours worked during the off season. The busy season typically begins at the start of the calendar year with many reports and returns due between January and April. Big Four firms are also busy during periods relating to companies’ quarterly reporting.
The Bottom Line
The Big Four refers to the four largest accounting firms in the U.S. While they employ a significant number of people, these firms also have their critics. Primarily, people criticize them for not asking clients the tough questions necessary to uncover fraud.