Big 4 vs local audit firmsPage |1 Market share of Big 4 in terms of revenue The combined revenue of Big 4s in the entire world considered together is around $125 Billion as of 2014 (theBig4, 2014). Among the big fours, Deloitte and Price Water house coopers are a close number one and two and keep interchanging positions. EY comes at a distant number three while KPMG comes at distant number four. In terms of geographic market share, the firms hold around 50% market share which is huge as this is worldwide market share. In some countries, big 4 hold up to 80% of the market share which in itself is a staggering figure (Slideshare, (n.d.)) The data above mentioned clearly indicates that the big 4 have dominated in the markets in the entire world. Looking at this data other way around also suggests that the all the companies and clients prefer to go to big 4 for their statutory and consulting needs. This is the reason that the big 4 are growing at a rapid pace and dominating the market in terms of number of clients and in terms of revenue in the entire world. The very obvious question that arises is that whether the market domination by the big 4 is good for the auditing field in particular and the consulting field in general. This could be studied by studying the methods of audit adopted by the big 4 and the strategy of auditing applied at the client. The big 4s follow a very rigorous audit strategy and are uniform in there market approach. The methods and the documentation which are used in say Australia will be used in United Kingdom and in Canada as well. The softwares used in the documentation processes are uniform in all the countries which give a level of comfort to the client which are operating cross borders. Needless to say that documentation if required by law of a specific country is followed accordingly. However, with the local firms or mid-sized firms, this cannot be achieved as the cost of implementation of softwares and cost of employees of running the same cannot be achieved by such firms. Therefore, the main reason of big companies going
Big 4 vs local audit firmsPage |2 for big 4 is that the audit process and documentation in all the countries in which the company is operating is uniform which is a huge level of comfort for such companies. Again,themid-sizedfirmshavelowlevelofinfrastructureandaregenerally understaffed as the employee turnover ratio is quite high. This sometimes may lead to lag of services on their part. As it is a well-known fact that the field of audit is ever evolving and with the change in laws, the method and the level of checking also changes. The big 4 are able to maintain a separate branch which studies the updates and are able to provide the employees with the details that help them to understand the updates in a practical manner which ultimately serves in the purpose of serving the client better and getting the audit done in a hassle free manner. However, having said that, it may not be ignored that there is huge amount of work pressure in big 4 which leads to high level of employee rotation their also. But due to huge level of documentation involved post audit procedures, the big 4s are able to maintain a smooth transition as all the information is available in the softwares which makes the firm independent of employees and help in maintaining a level of comfort. For the clients who are working in the multi-location, the possibility of audit being done by local firms is a difficult task. Even though the big 4 charge a lot of fees, but they are able to justify that fees as the amount of work they put into serving the client is also exceptional. The clients who are working at multiple places cannot hire audit firms as this would lead to duplication at all the levels of work and this may take a lot of time and effort for the middle level management to get the audit done. This becomes essential for the company to hire the services of big 4s as these are present virtually everywhere and have very good level of communication network due to which the clients are able to focus on their work and do not have to donate much time and effort in the audit procedures. Rather, the focus of the client is shifted on how to get the audit done by providing the essential data for the completion of audit. In these cases, when the company hires a smaller firm or the local firm,
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