Insurance For Accountants – Can Brussels End Big Four Dominance?

Those firms interested in insurance for accountants will also be interested to hear that a number of networks of firms are asking for help from Brussels to bring an end to the dominance of the Big Four.

Anyone who works in the sector and has an interest in insurance for accountants, will know that the Big Four refers to the massive accountancy practices who by their very size seem to dominate the whole industry.

The Big Four are the firms Deloitte, Ernst & Young, KPMG and PwC, and are the result of numerous mergers and takeovers which have produced ‘super’ firms. Now some of the smaller networks are upset that these mega firms have effectively got the large company audit market sown up.

The networks are ranked numbers five, six and seven in terms of fees. They are BDO International, RSM International and Grant Thornton International. And they are joined by a smaller network called Mazars.

They are starting to lobby the EU internal market commissioner Michel Barnier and their main gripe is that the European Commission must take steps to reduce the dominance of the Big Four when it comes to auditing the books of listed companies.

Few people outside the insurance for accountants sector might realise that when it comes to listed UK companies, the majority have their books auditied by one of the Big Four firms.

Listed companies are divided up on the London Stock Exchange into groups. The largest – by stock market capitalisation – are known as the blue-chips and they form the FTSE 100. These are the most actively traded stocks and make-up most of the share transactions on a daily basis.

But less well known are another couple of groupings which consist of large cap companies, and these are the FTSE 250 and the FTSE 350. Although nowadays less well used, the FT350 obviously includes those companies in the FTSE 100 and FT250. But the point is, and this is what annoys the smaller accountancy firms, is that most companies listed within the FTSE 350 have accountancy firms which are one of the Big Four.

UK listed companies are audited twice a year. At the half way stage (interim results) and the main audit follows the company’s year end. And here’s the problem for some of the smaller firms. It has almost become the convention that one of the Big Four firms should be used to conduct the audit of a FTSE 350 company. It’s a question of confidence. No-one says that the smaller firms can’t handle a large company audit; it’s more that the City investors, private investors and financial advisers are more comfortable when one of the Big Four are involved.

So, company management teams acquiesce and tend to hire one of the Big Four.

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