How the ‘big four’ accounting firms could threaten the global economy

How the ‘big four’ accounting firms could threaten the global economy, by Michael Dulaney.

Much of the modern economy relies on the work of auditors: the accountants who independently verify a company’s financial records. This work is crucial in providing accurate reports to shareholders and, ultimately, for safeguarding the economy at large. …

The current system now relies nearly entirely on the so-called “big four” accounting firms — KPMG, Ernst and Young, Deloitte and PwC — whose market share means they are often the only institutions big enough to audit multinational corporations.

So it should be of concern to us all, according to [award-winning journalist Richard Brooks], that in recent years the big four have “lost sight of their core purpose”, with only a third of their revenue coming from auditing and the rest earned from “consultancy services”.

“It’s not really any longer an accountancy profession,” Brooks said.

“It’s more a consultancy profession, or it would call itself professional services, with auditing just one of its business lines, and a minority one at that.”

Brooks argues this has created a conflict of interest, as the firms are now selling billions of dollars worth of business advice to the same companies they are supposed to independently audit.

“We’re in a situation where we need really good, strong, effective auditing more than ever,” Brooks said.

“But at exactly that time, the auditors have stopped being so interested in it, and have become much more interested in making money for selling consultancy services.” …

It’s not only the corporate sector that relies on the advice and professional clout of the big four. Brooks says they have become a kind of consigliere for government — selling their services to politicians and bureaucrat who want support rather than an independent appraisal.

If just four companies are providing a large portion of the business and bureaucratic/consulting advice to most western companies and governments, presumably that is where a lot of the expertise and power running the world really lies. I wonder where they stand on issues of PC?

Accountants wouldn’t advise creating lots of regulations that require people to come to them for advice, would they?