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The Big Four in 2024: accounting and auditing scandals

Inês Esteves
Market Monday Febraury 26th 2024

Even though the Big Four ended 2023 on a high note with the highest combined revenue since 2009, last year was also filled with accounting and auditing scandals, and 2024 hasn’t gotten off to the best start. Whether it is legal matters, promotion systems, or governance, the Big Four are all over the news and the current focus of regulators.

According to the Financial Times, the Big Four firms currently “operate as global networks of locally owned partnerships” and face significant controversy among the countries regarding the best governance. Therefore, the firms have decided to start a new chapter. PWC Australia hired an outside chair for the first time, a move that might set a precedent for the company globally. EY US has also decided to establish a board responsible for supervising the administration and approving policies.

Besides these governance changes, new disclosure rules have drawn attention to the Big Four. It is mandatory for employees and their immediate families to submit all of their financial records and to refrain from any client interaction that might put the company’s independence in jeopardy. Even though KPMG hasn’t yet made its reports public, the other three have reported violating these audit rules when disclosing 2022 data, but assure that independence was never put at risk. While conducting an investigation, the Public Company Accounting Oversight Board displayed that 46% of EY’s audits in 2022 were defective. The current chair and vice chair of EY US, Julie Boland and Dante D’Egidio, have stated that they are facing changes in their auditing practice and strategy and that this number doesn’t align with the firm’s goals and values.

Another major topic discussed about the Big Four concerns their promotion system. According to PWC UK, the employees who entered the company as graduates in October and November of 2022 will only be qualified for promotions six months later than expected. This has led to a general revolt by the staff, who have stated that the partners are more concerned with their personal finances than with their workers. Furthermore, despite the firm’s claim that among thousands of graduates, this only affects around 90 of them, PWC’s partners just received the second-highest compensation among the Big Four. Additionally, in an effort to boost competition among themselves, EY has already begun to reduce the number of staff, and Deloitte is also planning to eliminate jobs. The main reason given was that the high demand for consulting firms has come hand in hand with higher costs.

Last but not least, the threat of lawsuits has also become a reality for the Big Four this new year. EverGrande was one of the biggest Chinese real estate companies that recently went bankrupt. The company’s liquidators might be suing PWC for negligence, as this firm was responsible for their audits between 2009 and 2023. Even though this Big Four firm hasn’t made a public statement regarding this lawsuit, the growing practice of suing auditors in bankruptcies leads people to believe that this is merely a way for the liquidators to lessen the payment coming out of their own pockets. 

All in all, the Big Four haven’t had the greatest start this year, but after setting a revenue record last year, it isn’t possible to predict their numbers and reputation at the end of 2024.

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