Big Four

The Big Four refers to the four largest public accounting and professional services firms in the world: Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC). These four firms dominate the audit market for the largest publicly traded corporations, and between them they employ hundreds of thousands of professionals globally across audit, tax, consulting, and advisory practice lines.

The name reflects a long history of consolidation in the accounting profession. What was once known as the Big Eight in the mid-twentieth century shrank through a series of mergers to the Big Six, then the Big Five, and finally the Big Four following the collapse of Arthur Andersen in 2002, after that firm's role in the Enron accounting scandal led to its effective dissolution. No new firm has since grown large enough to join the group, leaving the same four names dominant for over two decades.

Audit remains the historical core of each firm's business and the activity most closely associated with the Big Four name, but all four have also built enormous tax advisory, management consulting, and deal advisory practices, in some cases generating more revenue than audit itself. This expansion has periodically drawn regulatory scrutiny over whether a firm can maintain true independence as an auditor while also selling the same client lucrative consulting services, a concern that has led some jurisdictions to require firms to separate or limit their audit and non-audit services to the same client.

Because of their scale, global reach, and resources, the Big Four are typically the only firms capable of auditing the largest multinational corporations, whose operations span dozens of countries and require coordinated audit teams working across jurisdictions. An audit opinion from one of the Big Four generally carries significant credibility with investors, lenders, and regulators, though the firms have also each faced high-profile criticism and litigation over specific audit failures at individual clients over the years.

Below the Big Four sits a group of large, though smaller, international firms sometimes called the “Big Six” or “next tier,” including names like Grant Thornton and BDO, which audit a significant share of mid-sized public companies and privately held businesses that do not require, or cannot afford, a Big Four engagement. Many smaller companies and organizations work with these next-tier firms or with purely local and regional practices, reserving Big Four engagements mainly for the largest and most complex audits.

Each of the four firms generates tens of billions of dollars in annual global revenue and employs several hundred thousand people combined worldwide, spanning dozens of countries, which is part of why they remain the only realistic choice for auditing the very largest multinational corporations whose operations and subsidiaries span so many jurisdictions at once.

Although they are best known for financial statement audits, each of the Big Four also runs large tax, consulting, and advisory practices, which together now generate more revenue for most of the firms than auditing itself. This has long been a source of tension, since a firm advising a client on tax strategy or systems consulting is not supposed to also be independently auditing that same client's books, and regulators in several countries have pushed the firms to separate their audit and non-audit practices more cleanly after a series of high-profile audit failures raised questions about whether consulting relationships were quietly compromising audit independence.

Because so few firms are capable of auditing the largest global companies, the Big Four effectively audit the vast majority of publicly traded companies by market value in most developed economies, a degree of concentration that regulators and investors have periodically flagged as a systemic risk — if one of the four firms were to suddenly fail or be barred from auditing public companies, as nearly happened to one smaller rival firm in the early 2000s, the remaining three would struggle to absorb that much additional audit work without a serious capacity crunch.