Report on Characteristics of Big Four and Non-Big Four Audit Firms

This report provides an overview of the characteristics of Big Four and Non-Big Four audit firms, with a focus on Deloitte and Macquarie Group. It covers their range of services, geographical coverage, number of staff, industries of specialization, marketing messages, and more. The report also discusses theories such as agency theory, information hypothesis, and insurance hypothesis, and their relevance to the Enron scandal. Based on the information provided, the report recommends Deloitte as a preferred organization over Macquarie.

Running head : AUDITING AND INTERNAL CONTROL
AUDITING AND INTERNAL CONTROL
Name of the Student
Name of the University
Author Note

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Table of Contents
Requirement 1............................................................................................................................2
Report on the characteristics of the Big Four and the non-Big Fours firms..........................2
Introduction........................................................................................................................2
Requirement 2............................................................................................................................6

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Requirement 1
Report on the characteristics of the Big Four and the non-Big Fours firms
Introduction
The aim of the report is make a research on the Deloitte (one of the Big Four Audit
firms) and Macquarie Group (a non Big Four). The two companies will considered for the
purpose of range of services that they render, their locations, workforce, industries where
they specialise, the publication of the clients or the general public, marketing messages and
various other topics.
The Big Four Companies that are KPMG, Ernst & Young (EY), Deloitte and
PricewaterhouseCoopers (PwC) are referred to as the four biggest professional services
network in the world. They offer audit services to other companies, assurance services,
taxation, and management consultation, advisory services, corporate finance and legal
services. They take care of the vast majority of the audits for the public companies and the
private Companies as well. The Big four firms are a network of professional services. Each of
the firms is owned, managed and operated independently, that have signed agreements with
the other member firms in the network to share a common name, brand and quality standards.
They provide the taxation services to big Government firms, multinational companies, so that
they can take appropriate steps to evade taxes.
Deloitte Touché Tohmatsu Limited, which is popularly known as Deloitte is a
network of multinational professional services. It is considered as one of the Big Four
accounting firms and the largest network of professional services in terms of terms of revenue
generated by them and the number of professionals they possess (2019 Www2.deloitte.com).

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Macquarie Group Limited is an Australian multinational independent investment Bank
and financial services company. It is an accounting firm, which possesses the largest
infrastructure asset manager (2019 Static.macquarie.com).
 Range of services provided by them
Deloitte firms render a wide range of services that are inclusive of audit and assurance,
consulting services, financial services, advisory services, services pertaining to risks, and tax
consultancy services. They renders services to the big multinational corporation that carrying
out their operations throughout the world. The approach that is followed by them combines
insight and creativity from various disciplines with business expertise to help the clients in
the enhancement of their expectations (2019 Www2.deloitte.com).
Macquarie provides services that pertain to the retail Banking and the financial services,
personal banking services, services with respect to wealth management, business banking,
vehicle finance products and also they render services to the retail clients, advisors, brokers,
business clients. They serve the Australian Market with their services
(2019 Static.macquarie.com).
 Geographical coverage
Deloitte operates in more than 150 countries. They have their offices in London, Spain,
Netherlands, Portugal, Belgium, Brazil, Canada and worldwide (2019 Www2.deloitte.com).
Macquarie has its offices in Sydney, Adelaide, Albury, New Zealand, Auckland,
Melbourne, the United States of America, Canada, Brazil, Thailand, China, India, Hong
Kong, Indonesia, Malaysia, Korea, Philippines, Singapore, Taiwan, Japan, south Africa,
Ireland, Germany, Switzerland, Russia, Spain, Scotland, Austria and worldwide
(2019 Static.macquarie.com).

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 Number of staffs and the special skills offered by them
Deloitte is a Private Company in United kingdom, which possesses around 286200
employees who render various audit services, financial advisory services and various tax
consultation services. They provide special audits, internal auditing services and auditing
services pertaining to various issues (2019 Www2.deloitte.com).
Macquarie, as per the reports presented in the year 2019 possesses 15715 employees,
who offer distinct services relating to the Retail Banking and the financial services, personal
banking services, services with respect to wealth management, business banking, vehicle
finance products (2019 Static.macquarie.com).
 Industries in which they claim specialisation
Deloitte is an organisation which operates for all the types of industries, that is they
render accounting services for all types of firms, otherwise it considers itself a part of the
audit industry. The Audit helps in the enhancement of the reliability of the corporate
information for all decision makers. The application is for audits of the annual and the
consolidated financial statements and also the voluntary special audits. This is an industry
where the services are rendered independently, without keeping preoccupied concepts
(2019 Www2.deloitte.com).
Retail Banking and the financial services, personal banking services, services with respect
to wealth management, business banking, and vehicle finance products
Macquarie belongs to the industry, which deals with Retail Banking, Financial services,
personal banking services, wealth management services, business banking, and vehicle
finance products (2019 Static.macquarie.com).
 Publication and other materials provided to their clients or the general public

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The other materials that are provided by Deloitte are Strategic insights and SAP
technology implementation, operating model transformation, Deloitte Accelerator for SAP
Ariba, Supplier risk framework, Supplier on board and integration, Data services, Tax
technology and management, Change Management, Cognitive spend Capabilities
(2019 Www2.deloitte.com).
Macquarie focus on various other materials such as safety of the employees, Leadership
and Governance, Minimising the impact on the environment, technology leveraging and
rendering services that would be in the interest of the country (2019 Static.macquarie.com).
 Marketing message
The marketing message that Deloitte has to serve is that their marketing lies in the
providing of solutions with a focus on the competitive advantage, deep empathy towards the
consumer, proprietary cutting edge methodologies, a bias for the building of the capabilities,
providing a bridge for the new CMOs (2019 Www2.deloitte.com).
The marketing message that Macquarie would deliver to everyone is to find out exactly
what their customers are looking for, Digitisation of their business, building of relationships
with start-ups in the industry, launching of start-ups (2019 Static.macquarie.com).
 Responsibilities
The degree of responsibility for Deloitte auditors and Macquarie auditors are absolutely
different. The responsibilities in the Deloitte Auditors is different from Macquarie in the
sense that Deloitte being a part if the Big Four has to meet the standards that it has set in
order to reach the predetermined goals, whereas Macquarie not being a part of the Non Big
four, has its own set of responsibilities. However as a part of the non Big four, the pressure it
gets id=s lesser in comparison to the sense of responsibility that Deloitte has got
(2019 Www2.deloitte.com).

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 Rank
The rank of Deloitte in comparison the Macquarie is much at a higher position. Deloitte
is considered one of the larger organisations in terms of the generation of the Revenue. On
the other hand, Macquarie is not the largest organisation in such regards. However, it strives
to be at the position, where Deloitte is today (2019 Static.macquarie.com).
 Income Generation
The revenue generated by Deloitte is $43.2 billion. On the other hand, the income that is
generated by Macquarie is $12.754 billion (2019 Www2.deloitte.com).
 Industry
Deloitte is a part of the Professional services industries. On the other hand,
Macquarie is the part of the industry that deals with financial services
(2019 Static.macquarie.com).
b) Recommendations
Based on the information that has been provided above it can be recommended that
deloitte is an organisation that is worth working in. it has got a higher turnover in comparison
to Macquarie. The revenue generated by them is also much higher. Deloitte and Macquarie
are both accounting firms. However, Deloitte should be preferred over Macquarie, because
the main aim of Deloitte is to focus on the customer service. Macquarie has indulged in to so
many other activities other than providing financial services that it has somewhere shifted its
focus towards those activities. However, it is a reputed organisation, which has been serving
parts of Australia and different parts of the world.
Requirement 2
a) Theories

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i) Agency theory
A suggestion on the part of the agency model is that, as a result of the asymmetries of
information and self-interest, there is a lack in the reasons to trust the agents. They
will seek to resolve the concerns by putting in place the mechanisms to align the
interests of the agents with the principals and in the reduction of the scope for the
asymmetries of information and opportunistic behaviour.
ii) Information hypothesis: Information hypothesis refers to the proposed explanation
for a particular phenomenon.
iii) Insurance hypothesis: According to insurance hypothesis, “Biodiversity insures
ecosystems against declines in their functioning because many species provide
greater guarantees that some will maintain functioning even if others fails”.
On the basis of the following theories, the reason why the clients took the action of
dismissing Arthur Anderson as their auditor, as he was held responsible for the shredding
of the documents in relation to the audit of Enron, which led to the Enron Scandal
(Boddy, C. R. 2017). The firm had to surrender its CPA license and lost its rights to
practice. The scandal resulted in the destruction of the firm’s international practices
(Carberry, E., & Zajac, E. 2017, January). The audits of the firm were absolutely faulty
for which the Big Four auditing firms were responsible (Bhaskar, K., & Flower, J. 2019).
On account of the bankruptcy of the WorldCom, Enron was tagged as the biggest scam in
the history of financial disclosure (Krarti, M. 2016).
b) Argument
i) The similar kind of cases might not happen in the future as the responsibility
of the auditor comes in to the picture, where the auditors are supposed to
provide opinion on the authenticity of the financial statements (Boddy, C. R.
2017). The auditors have to provide the investors with the information that is

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in the interest of the investors and lenders (Diermeier, D., Crawford, R. J., &
Snyder, C. 2017). They have to enquire the management for the purpose of
gaining of the knowledge of the organisation, the operations it has the process
of financial reporting, and others (Senft, S., Gallegos, F., & Davis, A. 2016).
ii) After the reign of the Arthur Andersen, the auditors have become aware on the
authenticity of the accounts. Arthur Andersen and the company was convicted
on the account of the falsification of the accounts. There is no surety of the
fact that such an incident may not occur in the future, however, such a scandal
has let the auditors know, there is always a scrutiny of the accounts that take
place by the concerned authorities (Cameran, M., Campa, D., & Francis, J. R.
2018). Hence, the quality of the audit has tended to improve, which is a good
sign that such a scandal has led to so many downfall. The downfalls were in
regards to the Arthur Andersen, or the international financial market (He, X.,
Pittman, J. A., Rui, O. M., & Wu, D. 2017). However, it has made the big
accounting firms and audit firm aware of the fact that the auditor has to
perform his duties with utmost honesty. There should be a quality in the
reports that are presented by the auditors.
iii) Audit planning is a significant area of the audit initially conducted before the
time of the beginning of the audit. It is done, so that there is a proper
framework that is provided to the audit task that is to be done. It is a guideline
that needs to be followed while following the task (Gentzkow, M., Shapiro, J.,
& Sinkinson, M. 2016). The plan possesses the objectives of audit, the scope
of the audit, the duration of the performance of the audit, the auditors that are
going to perform the audit, and the procedure of the performance of audit
(Yost, J. R. 2017). The benefits of the plan of audit is that the auditor can

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obtain appropriate evidence for the circumstances that are going to occur
while the performance of audit (Groomer, S. M., & Murthy, U. S. 2018). It
helps to regulate the cost of audit to a reasonable level (Horne, W., Haber, S.,
& Sander, T. 2015). The scope of audit can be well known with the help of the
audit planning that has been done. If there is proper planning done, before the
performance of the audit task, then the there might be possibilities that similar
tasks may not happen in the future.
Audit risk can be defined as the risk that an auditor may present report
that may be unqualified or may not be authentic enough to give the fairness of
the financial statements of the organisation(Bell, T. B., Causholli, M., &
Knechel, W. R. 2015). With respect to the Enron Scandal there may be the
occurrence of such events, however the chances are quite less, because the
auditors have got lessons with regards to the fairness of the financial
statements (Cameran, M., Prencipe, A., & Trombetta, M. 2016).

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