Big Four Blog pulls out some fascinating stats on the domination of the Big Four:
Now’s here an amazing finding – Big 4 firms (PwC, D&T, E&Y and KPMG) audit an astounding 98% of 1,500 largest public companies with sales over $1 billion. 60% of 6,000 companies surveyed said that there wasn’t enough choice in selecting auditors. The Herfindahl index, which measures concentration in a sector, for the audit market was 2,300 – the Department of Justice indicates that any number over 1,800 is highly concentrated.
Not surprisingly, concentration is high and choices are low – all indicators that things are as tight as they can get and any further concentration will mean structural and regulatory changes in the marketplace. That is to say, that while no one is expecting a reduction to Big 3, it will cause a number of governmental agencies to work in concert to mitigate the situation. Several actions to prevent these are mentioned in the report.
I believe this is a dangerous situation. Only yesterday, Richard Murphy asked in relation to the Big Four’s position in UK public sector:
..why do we assume that the Big 4, whose business model is to undermine the state, should advise it, and what should we think about politicians who accept that situation?
Taking the two sets of statements together, you’d be forgiven for believing that the Big Four are anything other than an oligopoly. The problem of choice is not new. Some argue that the Big Four’s grip on the markets is such that shrinking to the Bigger Three is unthinkable. Today, it is almost impossible for the next tier of players to make any headway against these giants. Some argue that the Big Four’s reach is such that in a global economy, the next tier is not able to deploy the resources necessary to provide adequate coverage. Those same voices have a point. But it is not a justification for the Big Four’s continuance as an oligopoly.
That’s why I hope Jeremy Newman in his new position as global CEO at BDO is able to take his campaign for better representation of the next tier to a fresh level. BDO ain’t perfect but it is a lot more transparent about its intentions and is making a good fist of looking after its people.
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