The four largest American accounting firms, measured in revenue, are known as the “Big Four”. They are Deloitte, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and Klynveld Peat Marwick Goerdeler (KPMG). Apart from auditing, the Big Four also offer strategy and management consulting, valuations, market research, and assurance services.
They recently started offering digital transformation consulting to meet the demands of the digital age. They are experts in tax law interpretation and on changes in accounting standards and auditing standards.
Understanding the Big Four
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What was once the Big Eight industry conglomerates have become the Big Four? This consolidation began in 1989. In alphabetical order, the eight were Arthur Andersen (Arthur Young), Coopers & Lybrand; Deloitte Haskin & Sells; Ernst & Whinney. Peat Marwick Mitchell and Price Waterhouse were also included.
These firms do most of the auditing work of some of the biggest public companies around the globe. The vast majority of Fortune 500 companies have had their financial statements reviewed by one of the Big Four. They have clients such as Berkshire Hathaway and Ford Motor Co., Apple, and Exxon Mobil. A 2018 report from the CFA Institute states that 30% of the S&P 500 was audited by PwC. 31% were audited in EY and 20% by Deloitte. 19% were audited at KPMG.
Four Accounting Firms:
Deloitte is the largest Big Four firm. Their workforce grew to more than 345,000 during their 2021 fiscal year. For the first time, the company’s annual revenues surpassed $50 billion. This was a 5.5% increase over prior-year revenue. Deloitte employed over 121,000 people in the United States during the fiscal year 2021. It operated 126 offices in 97 cities. Despite overall growth, Deloitte’s revenue for the United States in 2021 was down from 2020.
PwC’s 2021 annual revenue was $45.1 billion. This is the second-highest amount Big Four firms have reported, but it only increased by 2% in local currency (compared to the previous year). PwC invested $12 billion in new 100,000 jobs over five years to increase its global presence. However, revenue in the United States was flat. The company is also investing $3 billion in quality-centric improvements, including major advances in audit technology. PwC’s workforce increased to 295,000.
Ernst & Young’s fiscal year 2021 saw an increase in revenue of approximately $40 billion across the company, which is 7.3% more than the previous year. EY has seen 7.3% compound annual growth in the last seven years, ironically. EY announced recently a $10 billion investment to expand the company in order to reach more clients and better navigate their needs. EY reported that it had 312,250 employees at the end of fiscal 2021.
KPMG has over 219,000 employees worldwide, with 35,000 of them residing in the United States. KPMG has an office in every US state. 35,000 of them live in the United States. KPMG reported revenue of $32.13 Billion in U.S. Dollars with strong growth across many divisions.
What services do the Big Four Companies offer?
Every Big Four company will have a diverse staff with different levels of expertise to address their client’s needs. Big Four firms offer a variety of services, including audit, assurance and consulting, financial advisory, risk management, tax compliance, and financial advisory. Each firm can also assist with corporate restructurings and mergers.
The Bottom Line
The Big Four are the four largest accounting firms in America. They employ many people but they also have their critics. People criticize them for not asking tough questions to uncover fraud.