Richard Murphy has long argued that the Big 4 are not a single entity in the way they market themselves but a loose association of affiliate firms. This, as any practitioner will tell you, is not the same thing at all. This is a question Francine McKenna has raised arguing that:
But how “actual ” is this global network? Do the firms really work together seamlessly, depending on each other without question to do work locally and bring it all together under one global partner for a large multinational? Not exactly.
Now it seems, she has proof positive from Kerma Partners who specialise in advising global professional firms:
Dear Francine,
…I am a London-based partner of Kerma Partners; we are a strategy consulting firm to international professional services firms .
My partner Phil Kaszar and I have written about accounting “networks,” and I agree with several of your thoughts.
First, globally, the larger accounting firms have created a perception of market integration that simply does not exist.
Second, the (dis-)integration is a matter of degree: the smaller the network/affiliation – and the smaller the client – the more this non-existence of integration becomes apparent.
Third, accountants have been guilty of excessive risk aversion and thus have too often let risk management tail wag the dog of driving global objectives – this in turn plaintiffs counsel have managed to exploit as you well know and now the options for a “global” firm have become somewhat more limited.
Francine has long argued that the world’s largest companies need coordinated global coverage. I agree. However, what Kerma seem to be implying is that this is an illusion. It follows that for the many companies not needing that same level of cover, the Big 4 represent little more than an opportunity to associate with a brand. This comes over time and again when you look at how many of the FTSE 350 are audited by non-Big Four firms and the degree of campaigning the Big 4 are prepared to undertake in order to protect their hegemony.
Although some may see this as a tenuous link (for which get ready to be blasted over Big Four failures) I do not believe the Big 4 are unassailable. The old boys network in the City may like them but given the costs companies have had to bear in increased compliance fees the last few years, then it seems so-called Tier 2 players like BDO and Grant Thornton might want to use this revelation as a way to develop competitive arguments and strategies.
I hope Jeremy Newman is taking note. The profession needs a shake up to not only improve standards but to show the world that it remains relevant to business.
As a closer, this is often a topic of conversation with clients which are audited by the Big 4. I cannot tell you the number of times that senior executives have slumped when I’ve mentioned compliance cost and what they (don’t) gain out of the exercise.
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