It’s a typesetter’s nightmare.
PricewaterhouseCoopers+DeloitteTouche Ernst & Young KPMG.
But could it be a reality? Could the current Big Four end up the Really Big One?
Not likely. But remember, for much of the seventies and eighties, the Big Eight public accounting firms seemed like a fraternity in perpetuity. Indeed, by the early eighties, the Big Eight (Arthur Andersen, Coopers and Lybrand, Deloitte Haskins and Sells, Ernst and Whinney, Peat Marwick Mitchell, Price Waterhouse, Touche Ross, and Arthur Young.) bestrode the accounting landscape like the Magnificent Seven of the 1960s western.
But then came the corporate merger mania of the mid-1980s, and with it, a painful shrinking of the ranks of Big Eight audit clients. At the same time, many of the Big Eight’s publicly traded clients were growing in size, requiring heftier cadres of public accountants.
So in 1989, smack during the Big is Beautiful era, the seemingly indissoluble Big Eight downsized. That year, Arthur Young melded with Ernst and Whinney, while Deloitte Haskins and Sells hooked up with Touche Ross. (Lost in the conglomerating: the true pronunciation of founding father George Touche’s last name, which rhymes with the Scottish “loch.”).
The rest is recent history. Four years ago, Price Waterhouse and Coopers and Lybrand merged, and in the process, pushed reasonable standards governing the length of a firm’s name to the brink (PricewaterhouseCoopers). And earlier this year, Arthur Andersen LLP was convicted of obstruction of justice for its role in the Enron Corp debacle. The felony conviction, which meant the one-time accounting giant could no longer submit audited financial statements to the SEC, effectively marked the end of Andersen. The firm shut down in late August.
The elimination tournament had gone from six to five to the Final Four.
So how final is final? To be sure, some industry watchers have posited that a Group B accounting firm might jump up to assume a role in the top tier. But it’s not likely.
In 2001, for instance, KPMG, then the smallest of the marquee firms, had more than eight times the average sales per client of BDO Seidman, one of the top second-tier firms, according to Bowman’s Accounting Report figures. (Last year, KPMG’s average sales per client was about $860 million, while Seidman’s was around $98 million.)
In addition, Group B firms don’t have a strong overseas presence — pretty much a requirement if you’re going to audit the books of multinational corporations. What’s more, some experts say it will be a lot harder for smaller accounting firms to absorb the huge new compliance costs expected under the Sarbanes-Oxley law. Indeed, some experts predict a shakeout of second-tier accounting firms.
The upshot: don’t expect the Big Four to get any bigger anytime soon.