The Telegraph reports that the European Commission is to launch an investigation into the dominance of the big four accountancy firms – Ernst & Young (E&Y), PricewaterhouseCoopers, Deloitte and KPMG. Internal Markets Commissioner Michel Barnier said they would launch a Green Paper in the autumn to debate the role and governance of auditors, adding that audit firms should be supervised at a European, rather than a national level, to ensure consistent regulation.
Mr Barnier is quoted saying: “While the role of the main economic and financial actors (banks, hedge funds, credit rating agencies etc) were immediately called into question following the financial crisis, the role of the auditors has not really been questioned until now”.
Source: Open Europe
I have worked for a big four accountancy firm and I can assure you this is civil service delegated to the private sector. The whole audit methodology of the firm is a copy-paste directly from the law. Applied to butchers, it is like the State modeling the business plan, the disposal of the meat, the way it is bought, cut, presented and sold, what the butcher can tell you when you buy the meat, plus all the usual laws applicable to other businesses. And clients would have the obligation to buy meat from these butchers (being audited is mandatory for medium-to-big sized businesses). The living example of private but in fact State-controlled business.
And, concerning the dominance of the big four accountancy firms, it is a direct result of the combined effects of State regulation and globalization. Since firms are getting bigger, overpassing national borders, and State regulations make audit mandatory by one audit firm for all the company activities – even abroad, then no little accounting firm can do the job, and the biggest accounting firms pocket the rent.