Audit Quality and the Big Four

This assignment delves into the complex issue of audit quality within the realm of the Big Four accounting firms. Students are tasked with analyzing various factors that contribute to or detract from audit quality, including the impact of office size, going concern reports, legal environments, and corporate governance. The assignment also encourages critical thinking about regulatory frameworks and ethical considerations shaping the profession.

Research on ‘Big 4’ and ‘non-
Big 4’ audit firms

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
COMPARISON BETWEEN TWO AUDIT FIRMS.......................................................................1
Range of services....................................................................................................................1
Geographic coverage .............................................................................................................1
Staff strength and specialised services offered by companies................................................2
Industry of specialisation........................................................................................................2
Publications by both companies.............................................................................................2
Marketing message.................................................................................................................2
Busy season............................................................................................................................2
Responsibilities ......................................................................................................................2
Money.....................................................................................................................................3
Pick up tax return....................................................................................................................3
RECOMMENDATIONS ............................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Big four audit firms are known for their services in taxation, accounting and advisory.
They earn billions of dollars as revenue and most of the companies, listed in FTSE 100, choose
them for the purpose of auditing (Duff, 2011). This report will discuss about various differences
between a 'Big 4 audit firm' and a ' non big 4 audit company'. Own recommendation are also
given for more detail knowledge and to get clear idea on subject matter.
COMPARISON BETWEEN TWO AUDIT FIRMS
Mead Partners is a medium sized audit company that was established in the year 1997
and they have captured a significant amount of share in Australian market (More PLCs turning
to mid-tier auditors, 2017). EY, on the other hand, is one of the oldest and most successful
companies of auditing. In the present scenario, they are holding number one spot among 'big
four'.
Range of services
E&Y offers basically four types of services. First is assurance that includes financial
audit, advisory for resolving dispute and avoiding fraud (Arens, Elder and Mark, 2012). Work
relating to tax can be considered as their second service. They focus on transferring pricing and
various types of taxation. Third facility, which they provide to their clients, is regarding
advisory. It concentrates on different types of risks like IT and actuary that has also become its
significant part. Assistance in raising capital and finding right source of investment is the last
service that E&Y delivers in the market. Mead Partners also work in the same field and they
provide similar services to their customers but at a small level (Francis, Micha and Yu, 2013).
Their main focus is on business accounting and SMSF advising. Also, they provide assistance to
many start-ups as they face issues relating to strategic management.
Geographic coverage
E&Y is operating in almost 150 countries and they have around 700 offices. Mead
Partners is working in Melbourne and Victoria. Given before were its headquarter.
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Staff strength and specialised services offered by companies
Almost 225 people are working in Mead Partners and business appraisals are the special
qualities which they are offering in the market. This service is available for any company that is
operating is any industry. 231,000 is the approximate number of employees who are currently
working in E&Y (EY reports record global revenues in 2016 – up by 9%. 2017). Advisory
relating to financial accounting and investigation of fraud is the specialised facility which this
company provides to their clients.
Industry of specialisation
E&Y claim that they hold top spot in the financial audit sector. Most of their revenue
come from this business and these services are helping them in getting an extra edge over their
other 3 main competitors. Mead Partners, on the other hand, consider themselves as a leading
firm in tax advisory industry (Bannon, Ford and Meltzer, 2011). They help small companies in
managing their funds in an efficient way so that they can save huge amount of tax.
Publications by both companies
E&Y is present globally, and IFRS outlook, IFRS core tools are some of their different
publications. Mead Partners have a small magazine which they send to their clients so that they
can get practical guidance about various accounting and audit issues.
Marketing message
E&Y wants to make a better business world. They want to increase the trust of public in
companies because it is essential for sustainable growth (William, Glover and Prawitt, 2016).
Mead Partners believe in traditional thinking, as they use the same in order to solve different
issues.
Busy season
Companies like E&Y is flooded with work load for the whole year but medium sized
firms like Mead Partners are generally busy at the time of important accounting dates like last
date of filing return. (Malsch and Gendron, 2013).
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Responsibilities
An employee who works in E&Y has experience and knowledge of a limited section.
People working here have specialisation in their work but they do not have any idea about the
other projects and services on which the company is working (Skinner and Srinivasan, 2012).
People working in Mead Partners have to do different kinds of work and so, they are not
specialists in any particular field but they can do various kinds of works.
Money
E&Y spends a huge amount in terms of salary and other amenities on their employees.
They provide them luxury cars and expensive home and so, they do not switch to other 'big four
firm' (Liu, Uchida and Yang, 2012). Partners of same pay remuneration according to the
availability as they do not provide any extra facility to employees which they cannot afford.
They do not have fear of losing employees as most of their staff members do not have necessary
qualification which is required by 'big four firms'.
Pick up tax return
E&Y works for companies who have deep pockets. They do not provide their services to
a laymen of small business as they cannot afford them. Mead Partners prefer having limited
customers so that they can make personal and strong relation with each one of them (Kaplan and
Williams, 2012). Sometimes in order to understand the customers perspective their employee
pick a tax return from the house.
RECOMMENDATIONS
The group would prefer to work for E&Y because of various reasons. First of all, they are
present in various parts of this world and so, group members will get quality experience if they
become part of this firm. They can also learn different tactics relating to save money of clients
because their seniors will be well educated and experienced as well as working with them can
play a crucial role improving personality of group members. Growth opportunity for an
individual is more in E&Y as compared to Mead Partners as other companies like to hire a
person who has worked in major audit company.
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(Source: EY reports record global revenues in 2016 – up by 9%. 2017)
They are ready to pay huge amount in terms of salary along with other perks like luxury
vehicles and expensive home. If group members will work in a MNC then they can easily
become specialist of their field because these enterprises do not force an employee to do all kinds
of tasks. They try to develop a particular standards so taht company can provide quality services
to their customers. Group members can get chance to work in more than one country which may
be a quality experience for every individual.
CONCLUSION
It can be concluded from the above report that both types of audit firms have their own
pros and cons. An individual should focus on own demands in order to select an appropriate
company where they want to work.
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Illustration 1: EY reports record global
revenues in 2016 – up by 9%

REFERENCES
Books and Journals
Arens, A. Elder, R. J. & Mark, B. (2012). Auditing and assurance services: an integrated
approach. Boston: Prentice Hall.
Bannon, S., Ford, K. & Meltzer, L. (2011). Understanding millennials in the workplace. The
CPA Journal. 81(11). pp. 61.
Duff, A. (2011). Big four accounting firms’ annual reviews: A photo analysis of gender and race
portrayals. Critical Perspectives on Accounting. 22(1). pp.20-38.
Francis, J. R., Michas, P. N. & Yu, M. D. (2013). Office size of Big 4 auditors and client
restatements. Contemporary Accounting Research. 30(4). pp. 1626-1661.
Kaplan, S. E., & Williams, D. D. (2012). Do going concern audit reports protect auditors from
litigation? A simultaneous equations approach. The Accounting Review. 88(1). pp. 199-
232.
Liu, C., Uchida, K. & Yang, Y. (2012). Corporate governance and firm value during the global
financial crisis: Evidence from China. International Review of Financial Analysis. 21. pp.
70-80.
Malsch, B., & Gendron, Y. (2013). Re‐theorizing change: Institutional experimentation and the
struggle for domination in the field of public accounting. Journal of Management Studies.
50(5). pp. 870-899.
Memis, M. U. & Cetenak, E. H. (2012). Earnings management, audit quality and legal
environment: An international comparison. International Journal of Economics and
Financial Issues. 2(4). pp. 460.
Skinner, D. J. & Srinivasan, S. (2012). Audit quality and auditor reputation: Evidence from
Japan. The Accounting Review. 87(5). pp.1737-1765.
William Jr, M., Glover, S. & Prawitt, D. (2016). Auditing and assurance services: A systematic
approach. McGraw-Hill Education.
Online
More PLCs turning to mid-tier auditors. 2017. [Online]. Available through:
<http://www.thestar.com.my/business/business-news/2008/12/29/more-plcs-turning-to-
midtier-auditors/>. [Accessed on 26th September 2017].
EY reports record global revenues in 2016 – up by 9%. 2017. [Online]. Available through:
<http://www.ey.com/gl/en/newsroom/news-releases/news-ey-reports-record-global-
revenues-in-2016-up-by-9-percent>. [Accessed on 27th September 2017].
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