Big 4 vs Local Audit Firms | Report

Added on - Sep 2019

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BIG 4 Vs. Local Audit
Firms
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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