This refers to the four largest international auditing firms: Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (PwC). Many years ago, there was talk of the big ten or big eight, but mergers and consolidation have reduced the number of players in the industry and the group went from five to four following the demise of Arthur Andersen after the Enron accounting scandals.
There is continued debate over the dominance exerted by the four. The big four argue that they have evolved to be able to offer a worldwide service to their global clients. However, there are issues of conflict of interests being raised.
The big four have evolved from mainly being auditing firms to now offering a full set of services including consultancy and corporate finance. The level of fees generated from these non audit services are often much more lucrative than those from auditing which led to questions as to their perceived independence, a key to effective auditing. The Sarbanes-Oxley Act (SOX or Sarbox) enacted in the US in 2002, a consequence of the Enron collapse, now severely restricts non audit services at the auditees, and similar measures have been adopted in many other countries.
Furthermore, the big four have come under fire over the banking crisis and whether they should exert greater scepticism in their audits of certain banks, a point of view expressed by the Financial Services Authority (FSA) and Financial Reporting Council in the UK.