Breaking up of Big Four Audit Firms: Critical Analysis

Critical Analysis on
Breaking up of Big
Four Audit Firms

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Arguments to support break-up of audit firms.......................................................................3
Arguments against the break-up of audit firms......................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In order to ensure compliance with relevant professional standards, regulatory
requirements, and legal requirements, and that reports issued by the firm are appropriate in the
circumstances, every audit firm is required to establish a quality control system. 'Quality means
doing it right when no one is looking.' Henry Ford. The first expectation from an audit is
probably to receive a report that has not been modified. The audit provides stakeholders with this
primary value. It is important to communicate timely reporting to maximise the value of the audit
as many stakeholders request the audit to be completed by a specific date each year. The auditor
during the process of an audit is expected to provide documentation of their understanding of
internal control environment in their audit planning, communicating any significant deficiencies
they identify and recommendations for improvement. In the recent period none of the Big Four -
Deloitte, EY, KPMG, and PwC managed to surpass the 90% target of their audits. These
accounting firms are in news for not so good reasons, highlighting issues such as failure of
Unified Health Infrastructure Project by Deloitte, Major financial and accounting irregularities in
listed companies audited by KPMG in Oman, Inspection report of EY by PCAOB indicating its
worst deficiency rate (21 Scandals, Settlements and Corporate Crimes of Big 4 Accounting
Firms in 2019).
MAIN BODY
Arguments to support break-up of audit firms
Britain’s Big Four accountancy firms need to face a full break-up of their audit practices
from rest of the opposite operations to avoid ability struggle and weaken their “stranglehold” on
an audit market discredited with the aid of corporate failures including Carillion and BHS.
However, the running battle between government and such audit firms is whether the dimensions
of the audit company has an effect on audit quality. Public accounting firms have extremely good
duty and requiring expert concerns to fulfil their duty to the users of audit report. They also
provide other services for their clients, which includes special audit, tax offerings, other
attestations, accounting services and management consulting (Why the Big Four provide higher
quality audits, 2020). Public accountant firms that are famous along with Big Four's are