Auditing Services: PwC vs. BDO Australia - A Comprehensive Analysis

This report provides a comprehensive comparison of the auditing services offered by PwC and BDO Australia. The analysis encompasses a range of factors, including the scope of services, geographical coverage, staffing levels, industry specialization, and service quality. The report highlights the key differences between the two firms, emphasizing the advantages of PwC, a Big Four firm, in terms of global exposure, service quality, operational scale, and employee remuneration. The report also includes a case study examining the collapse of Arthur Andersen and the Enron scandal, analyzing the factors that led to the downfall and arguing why such incidents are less likely to recur due to changes in accounting standards and auditing regulations. The report concludes with a recommendation for clients, suggesting that they consider the benefits of engaging with a Big Four firm like PwC to gain from its comprehensive services and global expertise. This report is a valuable resource for students looking for in-depth analysis of auditing firms and their services.

Running head: AUDITING
Auditing
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
The main purpose of this assignment is to analyze the services which are provided by one of the
BIG four audit firm in respect of the services which are offered by a non-big Four audit firm.
The assessment will be analyzing from the range of services which are provided by the audit
firms to the quality and efficiency of the services which are provided by the business. In addition
to this, the assignment will also be recommending for the clients as to whose services should be
rendered by the client. One of the Big four audit firm which is selected for this assignment is
Price Waters Coppers (PwC) and the non-big four firm is BDO Australia.

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Table of Contents
Part 1................................................................................................................................................2
Introduction......................................................................................................................................2
Discussions......................................................................................................................................3
Range of Services........................................................................................................................3
Geographical Coverage...............................................................................................................3
Number of Staffs and Special Skills offered...............................................................................4
Industries in which the Business specializes...............................................................................4
Recommendation.............................................................................................................................5
Part 2................................................................................................................................................6
(a) Research on Arthur Anderson/ Enron...............................................................................6
(b) Argument..........................................................................................................................8
Reference.......................................................................................................................................10

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Part 1
Introduction
The main purpose of this assignment is to analyze the service which are provided by PwC
and BDO in Australia which is related to auditing. In recent world, the role of auditing in
business is very much essential. The changing business environment and in the wake of
accounting scandals the role of an auditor is considered to be very important for the business and
promoting fairness and honesty in preparation of the financial statement of the business. The role
of an auditor is comment on the financial statements whether the financial statements are
showing true and fair view or not. In this assessment, the comparison is between PwC and BDO
both of the firm provides audit services to the business.
Discussions
Range of Services
The business of PwC which is regarded as one of the big four audit firms. PwC is
regarded as one of the big 4 because of the large-scale operations which is carried out by the
business. The business provides advisory services which helps businesses to formulate strategies
which are effective for the business, audit and assurance services which forms a major part of the
services which is provided by the business (Yasar, 2013). Audit and Assurance Services provides
assurance to the potential investors about the true and fairness of the financial statements of the
business. In addition to this, PwC also provides family business services and tax services to the
clients of the business. On the other hand, BDO provides similar services which are same as
PwC and the core part of the business is the audit services which is provided by the business
(Messier, Glover & Prawitt, 2015).

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Geographical Coverage
PwC is one of the big 4 firms and therefore has a wide scale operation across many
countries. The company has established its business in more than 107 countries across the world
and the headquarters of the company is situated in London and the business also has branches in
US, India, Australia and some other major countries of the world (Kend, Houghton & Jubb,
2014). On the other hand, BDO operates in Australia and has various branches which are situated
across Australia itself. Therefore, it can be said that the company is local company and only
looks after the domestic business. PwC on the other hand is multinational and operates and
handles businesses of foreign countries as well.
Number of Staffs and Special Skills offered
PwC is known to be one of the firms which provides exceptional services in auditing and
assurance as well as tax. The company is responsible for tremendous employment generation in
Australia and other countries in which the business operates. The business specializes in
providing audit services and tax services to the clients (Eilifsen et al. 2013). On the other hand,
BDO also generates employment opportunities in the service sector but does not generate as
much employment as PwC can be generate which is natural as the company has not that much
vast business as compared to PwC.
Industries in which the Business specializes
PwC has wide business market and offers a wide range of services for its clients. The
business however specializes in industries such as Banking and finance, automotive,
manufacturing sector, energy generation, healthcare sector, Governmental services. In addition to

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this, the business also provides services to various other sectors which are subsidiaries of the
above mention industries or related to the same.
BDO on the other hand specializes in financial sector, healthcare, Governmental services,
Natural resources industry and non-profit business. Some of the Industries are similar to PwC’s
business. However, the scale of operations which PwC engages is significantly more than what
BDO operates.
The business of PwC is committed towards providing the best quality services so that the
business can gain competitive advantage in the eyes of the client and the business can effectively
compete with the other big 4 firms. The motive of PwC is to be at the top of the other big 4 firms
for which the business recruits the best talents in employees and train them to ensure that they
are of value to the business (Leung et al., 2014). On the hand BDO is focused towards bettering
the services which the company provides and also further expanding the business in Australia.
The business of BDO is committed towards providing its clients with the best services possible
and the business is still developing considering the variety of services such advisory, audit and
assurance, tax related services which the business has on offer. The scale of operations of the
business might not be as large as PwC but the firm is certainly developing.
Recommendation
After analysis of the above discussion part which compares the business structure of PwC
and BDO in order to estimate which of the audit firms have a better service opportunity and
scope for growth in the business. The above discussion clearly shows that the services which are
provided by both the audit firms are similar in all respects and both businesses provides more or
less services. However, there are certain areas where PwC which is one of the big four audit

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firms are more productive from the point of view of services which are provided by the business
than a non-big four firm like BDO. The areas where PwC is more productive from an
employment perspective are given below in details:
 The global exposure which the company provides for the employees of the business is
very productive for the employees in the long run. It is a known fact that PwC operates in
many countries and it is quite natural that a branch of PwC of a foreign country takes
help from the PwC which is situated in Australia. Therefore, the employee working in
PwC has an exposure to global working conditions and norms.
 The quality of services which are provided by PwC is exceptional in every way and the
business is highly trusted by the clients and therefore has a positive image of the integrity
of the firm in the view points of the clients. This motivates the employees to perform
better and provides work satisfaction.
 The level of Operation of PwC is much more than BDO and therefore employee would
like to work for PwC due to the variety of services and vast range of operations for the
business.
 Lastly there is a condition of remuneration of the employees which is certainly more in
case of any big for firm as compared to a normal accounting firm.
Therefore, from the above analysis, it can be clearly stated that the group should work for a
big four big four business firm such as PwC. The employee will be having better scope of growth
and remuneration in PwC and in addition to this there is the global exposure which PwC has to
offer.

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Part 2
(a) Research on Arthur Anderson/ Enron
One of the biggest auditing collapses and infamy activities that have taken place in the global
economy has been the bankruptcy of Enron and the closure of Arthur Anderson. The closure of
the Arthur Anderson was an event of their clients and the potential clients refraining from
undertaking auditing activities with them. There are several factors that have led to the client
undertaking these kinds of actions and the client undertook the decision even before the company
announced their closure (He, Pittman and Rui 2016). The clients of Arthur Anderson undertaking
these decisions have mainly been due to the two related theories that are information hypothesis
and insurance theory.
Sorensen and Miller (2017) highlighted that there were two other incidents of bankruptcy
that took place for Arthur Anderson’s client and information on these companies were not known
in the economy properly. However, after the incident of Enron, the clients were in no doubt in
order to take the decision. The decisions were based on the information hypothesis because of
the fact that information hypothesis is exploited in order to address the demand that is existent
for external audits. With respect to this hypothesis, it is seen that services related to audit are
demanded in order to mitigate the risk related to information to the ones who make use of the
financial reports. The risk related to information refers to the risk related to the decisions of the
investors due to the availability of false information (Boddy 2017). Therefore, auditors are
essential in order to mitigate the losses because of the false and incorrect decisions leading to
errors within the financial reports. Therefore, according to this theory, the companies have
discovered that Arthur Anderson being the external auditors has not been provided true and fair
information to the investors and this may lead to faulty decisions. Therefore, in order to

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safeguard themselves for this kind of issues and to maintain the trust of the market the clients
have taken this decision.
The decision is even based on another theory as well and this theory is the insurance theory.
This theory states that the auditors are demanded for the fact they can be sued in case there is a
failure of a business. The process of auditing therefore provides the investors to create insurance.
In case the investors buy shares by relying on the financial reports that have been audited and
thereafter faced loss, the laws provide some sort of extent to recourse against the auditors
(Gerakos and Syverson 2015). It is due to the hypothesis that the clients of Arthur Anderson
anticipated that the investors may file a case a case against Arthur Anderson that in a way would
have an impact on Arthur Anderson and thereby have an impact on their brand image as well.
Therefore, they undertook the decision even before Arthur Anderson announcing their closure.
(b) Argument
(i) The incident that took place between Arthur Anderson and Enron will not be repeated
again because of the fact that there have been changes in the accounting standards as
well as rules and regulations related to the auditing practices. The main issue that was
existent among Enron and Arthur Anderson was the conflicts between the auditors
and the audit committee of Enron. But the leading partner of audit neglected these
concerns (Soltani 2014). It has even been observed that the auditors of Arthur
Anderson wrote fraudulent memos that explained that the experienced standard group
sanctioned the accounting practices of Enron and concealed the pumped up income
and debts. These incidents were the main factors that led to the fall of Arthur
Anderson and after this scenario was exposed in public there was a massive chaos in
the market as the investors lost faith over the auditors and the audit firms. They were

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having the idea that the financial statements that have been audited have been done
for their own personal interest and this did not have any kind of help for the investors.
(ii) After the advent of this incident, there have been changes in several accounting and
auditing standards and regulations in order to safeguard the sentiments of the
investors and keep the auditors and the audit companies under surveillance and check.
One of the changes have been seen with the establishment of AICPA and various
other accounting groups and the other changes have been development of rules and
regulations from the government and the government agencies (Choi, Kim and
Raman 2017). The other changes have been the ones that have incorporated naturally.
The new standards that were introduced by AICPA have been SAS98, SAS 96 and
SAS 99 and these standards were effective from 2002. These policies were
established in order to ensure that the retention policies of the records of the
companies were reaffirmed (Torbert 2015). Each of the regulations had their own
feature and everyone one of them looked to keep a check on the auditing practices of
the companies in order to create true and fair results through audits for the financial
statements of the organizations.

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Reference
Boddy, C.R., 2017. Enron Scandal. Encyclopedia of Business and Professional Ethics, pp.1-4.
Choi, J.H., Kim, S. and Raman, K.K., 2017. Did the 1998 Merger of Price Waterhouse and
Coopers & Lybrand Increase Audit Quality?. Contemporary Accounting Research, 34(2),
pp.1071-1102.
Eilifsen, A., Messier, W. F., Glover, S. M., & Prawitt, D. F. (2013). Auditing and assurance
services. McGraw-Hill.
Gerakos, J. and Syverson, C., 2015. Competition in the audit market: Policy
implications. Journal of Accounting Research, 53(4), pp.725-775.
He, X., Pittman, J. and Rui, O., 2016. Reputational implications for partners after a major audit
failure: Evidence from China. Journal of Business Ethics, 138(4), pp.703-722.
Kend, M., Houghton, K. A., & Jubb, C. (2014). Competition issues in the market for audit and
assurance services: are the concerns justified?. Australian Accounting Review, 24(4), 313-320.
Leung, P., Coram, P., Cooper, B. J., & Richardson, P. (2014). Modern Auditing and Assurance
Services 6e. Wiley.
Messier, W. F., Glover, S. M., & Prawitt, D. F. (2015). Auditing & Assurance Services: A
Systematic Approach. Qing hua da xue chu ban she.
Soltani, B., 2014. The anatomy of corporate fraud: A comparative analysis of high profile
American and European corporate scandals. Journal of business ethics, 120(2), pp.251-274.

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Sorensen, D.P. and Miller, S.E., 2017. Financial accounting scandals and the reform of corporate
governance in the United States and in Italy. Corporate Governance: The International Journal
of Business in Society, 17(1), pp.77-88.
Torbert, P.M., 2015. What felled Arthur Andersen? It depends…. Peking University Law
Journal, 3(1), pp.227-284.
Yasar, A. (2013). Big Four Auditors' Audit Quality and Earnings Management: Evidence from
Turkish Stock Market. International journal of business and social science, 4(17).