Big 4 cannot be big

Source: The Australian

We all know the Big 4 accounting firms - PwC, EY, Deloitte and KPMG… they are large, they are important. So Bojo may need a better plan to ruin them.

Wait, a plan to ruin the Big 4?! 😱

That’s right, and not something new. In Mar. 2021, Britain proposed to weaken the dominant position of the Big 4 and leave more opportunities to small auditing firms, totalling 155 changes. Here’s a summary.

  • Work together. Large British companies will be required to select another smaller auditing partner to work together with Big 4 for performing the annual check.
  • Or… limit the size. If the above rule does not work, the Big 4 will face a market share cap.

UK government expects that small auditing firms could get 12% market share from the Big 4, with GBP 1 bln additional revenue. But they are facing big challenges for the new rule.

What are the challenges here? 🧐

During the consultation period, the proposal received many challenges, either from large companies, or from small auditors.

  • Cost is always the key. Having one more auditing partner means paying double. That does not sound good… 🤑
  • Too hard to handle. The complexity of the financial statements for big companies may be too hard for small players and it’s out of their ability.
  • Maybe, quality? Auditing is usually performed by one auditor. If the Big 4+rival couple work together, how they could ensure the auditing quality is another concern.

Given the setback, Bojo probably needs to rework the whole plan, per Reuters.

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