Should the “Big Four” be broken up?

By: Tim Bennett

Should the “Big Four” be broken up?

In the wake of the Carillion collapse, some critics are calling for the world’s accounting giants to be broken up into smaller firms. I take a look at why and ask whether it is likely to happen.

Who are the “Big Four”?

Global auditing (checking the accounts of companies) is dominated by just four firms, all of whom are run as private partnerships.

What do they do?

The work of these firms, and their many smaller rivals, can be split roughly into two areas, auditing and consultancy.
These firms have a primary responsibility to the shareholders of the firms they audit to confirm that the accounts are prepared fairly and in accordance with the latest rules. Over recent years, however, these firms have also taken on lucrative consultancy contracts, often for the same clients. It is these that are the subject of much debate as critics say that this extra work creates a huge conflict of interest.

Where is the conflict of interest?

The problem is that auditing requires these firms to challenge management and hold them to account, whereas consultancy work is often about keeping management happy and essentially telling them what they want to hear.
Some say that these two conflicting requirements cannot be reconciled under the same roof.

The Carillion collapse

Perhaps the highest profile recent case that the critics point to as an example of the problem, is Carillion. The Big Four are accused of dividing up lucrative work between them and paying scant regard to the interests of shareholders.

What the critics want

Those who say that the current system is flawed suggest several possible ways to reform it, including the creation of a national auditing body.

How the Big Four are fighting back

The four firms under the spotlight remain adamant that the current system works, albeit with room for improvements. In particular they rebuff the idea of a single, national auditing body because it would struggle to gain traction in a globalised economy.
They also point out that auditing is a challenging job in modern financial markets and their status and size helps them to attract the brightest and best to it. Moreover, they say they can manage conflicts of interest and are taking steps to improve this area further.


This is not the first time calls to break up the Big Four have been made. It won’t be the last, either. The odds are that they will escape a forced break up if they can demonstrate that they are taking their critics seriously. However, any failure to do so, or evidence of too much hubris in the wake of some big recent PR disasters, may carry a high price this time around.