'Big four' maintain hold on UK audit market

The Big four is composed of Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers. The share of these four auditing companies has not changed the latest four years. Even tough, regulators are taking measures to promote competition of smaller firms. Moreover, there is only one company in the FTSE100, the most important stock exchange, that does not use one of the auditors of the Big four namely the business Randgold Resources which is audited by BDO.

As I said regulators are promoting smaller companies, Steve Maslin, partner of Grant Thornton, also wants to give smaller firms a chance to execute a big audit. As a result of some misunderstandings, the Big four are thought to be the only auditors that furnish services at the biggest public companies.

In 2006, the report of FRC and the Department of Trade and Industry declared that large companies did not have any alternatives other than the Big four to do their audits. This report also explained that it was impossible for small firms to enter at these big audits because of high barriers. Consequently, the makers of this report started a working group with the aim to become a concurrent of the Big four. The latest report showed that there is a small growth compared to 2006.

You can wonder whether it is necessary to bring some competition for the Big four or not, regulators want this because they are afraid that a mistake of one of the Big four could eventually lead to a catastrophe in the British Business. However, this has already happened after a downfall of Arthur Andersen, which used to be one of the Big five. As you know the Big five became the Big four after the Enron scandal.

In my view, I really think it is essential that the working group of any other competition of the Big four become more important. As you have read in some other blogs, for example the blog: ‘Cooperation of E&Y in beer fraud’, Ernst&Young is having some big issues and maybe they end like Arthur Andersen. This can lead to a downfall of the Big four, companies can lose their thrust in it because this had already happened once. Therefore, they would not tolerate a second decline.

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