What are the big issues with the 'big4'?

#1

Hi All, what are the main issues with ‘big4’? Is there any that I can discuss at an interview? Thanks.

#2

Do you mean for [[commercial awareness]] type questions?

Recently, the big issues have been:

  • the credit crunch
  • accountancy failures (e.g. Northern Rock’s auditors - PwC - failed to establish that the bank were destined to fail, although they should have)
  • should accountancy firms have management consulting arms

What have you come up with?

#3

redsuperted… in reference to ur 3rd question…
why should and why shouldnt accountancy firms have management consulting firms?

its just like any of their other business divisions.

also, someone was telling me that deloitte’s consulting is different from other big4’s consulting division… does anyone know in what way?

#4

I think the issue is conflict of interest. Auditors oughtn’t have the same clients as Consultants, however, since most of the FTSE 100 is serviced by the Big 4, it became increasingly difficult to keep the client base big enough at the same time as keeping them separate. Does that make sense? (i.e. say, PwC has 2 service lines - Audit and Consulting; Audit has 50% of FTSE 100 thus leaving only 50% available to Consulting; if the conflict wasn’t there, both Audit and consulting could have (potentially) 100% of FTSE 100 to choose from).

I believe that Deloitte consulting is actually still part of Deloitte… (I might be wrong though)… where as PwC lost it’s consulting to IBM, CapGemini rose from E&Y (I think) etc.

#5

also something i read in the paper, might be a bit minor…but with the banks merging etc there are less banks to audit, and these were the firms with the largest audit bills

In regards to them not being allowed to have audit and consulting divisions, well they still do it

that’s basically because the auditor is less likely to say the financial statements are rubbish if the clients are also paying for other more lucrative services from them…well i think that’s the idea :slight_smile:

audit has long been known as a loss leader as to cross sell other services

#6

@shlobadov, I assure you there’s no conflict of interest when Big 4 firms have consulting arms because they NEVER audit firms that they provide advisory/consultancy services to. That would just be Self-review if they did. There are strict regulatioons regarding this and Big 4 firms always go above and beyond the call of duty when it comes to complying with the regulations.

Audit is the strength of the Big 4 firms anyway and I guess most of them are trying to diversify and really strengthen their Consultancy/Advisory arms. Deloitte never lost theirs which is why they are miles ahead of the other Big 4 when it comes to Consultancy.

#7

Yes, that’s what I said. There’s no conflict NOW. Precisely because of the conflict of the above interest, those regulations are now in place. Hence, the big 4 don’t have consulting arms. Not because they can’t, but because it restraints their potential client base.