Meet the Big 4 Accounting Firms: Revenues, History, and Reputations

Meet the “Big 4”: Big 4 Accounting Firms Revenues, Reputations, and More

As a student or working professional, you will encounter the Big 4 sooner or later. The Big 4 Accounting Firms – PwC, EY, Deloitte, and KPMG –  have evolved into their own ubiquitous brand.

But first, why is the Big 4 known as the Big 4? Well, it’s pretty simple. There are 4 of them, and they are BIG. And when I say “big,” I mean *BIG.* PWC, EY, Deloitte, and KPMG each have a presence in at least 160 countries, employ 1.5 million people, and generate about $57 billion in revenue on average. Impressive.

For some more context, the Big 4 firm with the lowest revenue is KPMG, with ~$38 billion. The next biggest accounting firm (BDO USA) only generated around $14 billion.

The Big 4 firms and firm #5 are in different stratospheres. Also, the Big 4 accounting firms are similar in size and the types of services each firm provides.

Big 4 Revenue By Accounting Firm

 

Big 4 Accounting Firm Revenue by Service Line

The major line of service and the core “moneymaker” in the Big 4 is auditing (also referred to as assurance). Audit work typically generates over a third of total revenue, followed by advisory work and then tax work.

One thing to note is that these firms are continuously evolving and shifting their service offerings to meet client demands (both current and projected in the future), so not all types of projects fit nicely into these boxes.

One advantage from a client perspective of hiring a Big 4 firm is that they can bring an astronomical amount of both depth and breadth to the table. For example, my team used to do a lot of consulting for big banks on new technology. It was a great selling point for us that we could bring people and experts from across the firm to consider any project’s technology, accounting / regulatory, and tax implications. The Big 4 are trying to offer a full suite of services from strategy through execution – a rarity among professional services firms.

Diving into the Big 4 Firms: History & Stereotypes

You should understand that the Big 4 firms are similar in size, scope, and service offerings. However, just like four children from the same family, they have their differences and exhibit unique characteristics. It is important to understand those differences, especially when trying to land a job at a Big 4 firm, so let’s dig deeper into each firm.

Deloitte

Let’s start with Deloitte – colloquially referred to as “the dot’ due to their strict branding guidelines around the color, size, and shape of the dot at the end of “Deloitte” in their logo. In 2016, Deloitte generated the highest revenue of $37.8 billion, beating out last year’s leader, PwC. Deloitte employs ~460 thousand people worldwide.

General Info: Deloitte Touche Tohmatsu (yes, this is Deloitte’s full name) was founded in 1845 by William Deloitte. Going through several mergers, either taking place in the US or the UK, with Tohmatsu joining the firm relatively recently in 1990, Deloitte became the firm we know today. Nowadays Deloitte provides some traditional services like Tax, Consulting, Audit & Assurance, and Risk Financial Advisory.

Audit still plays a big role in the company’s profit-generating ability, though Deloitte’s consulting business is second to none. In the early 2000s, other Big 4 accounting firms sold or spun off their Consulting practices in the wake of the Enron scandal and subsequent regulations (e.g., Sarbanes-Oxley or “Sox”). Deloitte decided to keep their consulting practice in-house, putting them ahead of the pack once the other Big 4 firms re-booted their consulting arms.

Globally, Deloitte boasts many premier clients, such as Adobe, P&G, Boeing, Starbucks, Morgan Stanley, and Berkshire Hathaway. Deloitte services roughly 90% of the Fortune 500 Companies.

PwC (PricewaterhouseCoopers)

PricewaterhouseCoopers (yes, they really smoosh the name like that), PwC, or “p-dubbs,” gave up their spot as top dog to Deloitte in terms of revenue, but, regardless, is still viewed as one of the most prestigious Big 4 firms. It didn’t hurt that PwC acquired the firm formerly known as Booz & Co in 2014, bolstering its strategy consulting practice. Due to weird legal mumbo jumbo, Booz & Co. had to re-name post-acquisition, and the firms decided to go with Strategy& (pronounced “Strategy and“, not “strategy ampersand”). It’s unconventional and controversial, but it works for them!

General Info: PwC started its journey in 1848 with Samuel Lowell Price setting up business in London. The maindevelopment of its professional history happened in 1998 when PriceWaterhouse and Coopers & Lybrand merged to start the PwC that we know today. PwC’s present line of services includes Audit & Assurance, Tax, Legal and Advisory.

While PwC’s bread and butter are still audit and assurance services, they carefully monitor global trends (or, as they call them – megatrends) and expand into practice areas they see fit for significant growth like Big Data, Advanced Analytics, Sustainability, Climate Change, etc.

Across all lines of service, PwC can boast an incredible list of companies served, such as the Oscars (yes, the one from Hollywood), Disney, IBM, Exxon, Morgan Stanley, Cisco, Goldman Sachs, Johnson & Johnson, Ford, Chevron among countless others. In total, ~85% of Fortune 500 engage PwC across some line of service.

EY (Ernst & Young)

EY, the middle child of the Big 4, is the perennial third-place firm in terms of revenue.

General info: Ernst and Young is another company that was formed through a merger. In 1989, Arthur Young merged with Ernst & Whinney, resulting in the Ernst & Young that the world knows today. Like any company that has been running for a long time, the company has a long history of providing only the very best services, and this means they choose people with only the very best skills and those who have integrity, enthusiasm, motivation, teamwork, professionalism, and respect – the very values that drive the accounting firm. The company also provides training and development for the professional growth of its employees.

EY has an impressive client list, including the tech giants Google, Amazon, and Facebook. On the flip side, they also have McDonald’s if you’re looking for a more tangible and delicious(?) client.

KPMG (Klynveld Peat Marwick Goerdeler)

Last but not least is KMPG. Unlike Ernst and Young, PricewaterhouseCoopers, and Deloitte, no one calls KPMG Klynveld, Peat, Marwick, and Goerdeler.

General Info: KPMG’s history started back in 1818. There are 4 different names in KPMG (Klynveld, Peat, Marwick, and Goerdeler), which means there were more than enough mergers in the history of this company. The last major merger happened in 1987 when PMI (Peat Marwick International) merged with KMG (Klynveld Main Gordeler).

KPMG is the smallest of the Big 4 accounting firms, generating *only* $38.4 billion in revenue and employing only about 275K people (compared with the average numbers mentioned earlier). Remember, this is still ~2x bigger than the #5 accounting firm, BDO USA.

While the revenues may be smaller than the other Big 4 firms, they still boast several high-profile clients, such as PepsiCo, Rolls Royce, Wells Fargo, GE, Pfizer, Hershey, Deutsche Bank, etc.

Also, a fun fact: KPMG audits Accenture.

What is special about Accenture? Remember Arthur Anderson (“AA”), the firm that reduced the Big 5 into the Big 4? When Enron destroyed AA, its consulting line of service decided to leave the sinking ship and turned it into Accenture through some massive re-branding effort. We can say that AA’s legacy is still living through Accenture, and KPMG is supporting this legacy through auditing Accenture. Well, let us hope it will not make the same auditing mistakes AA made with Enron, though this situation will be full of irony if it happens.

Big 4 Stereotypes & Culture

While our CPAs wrote this through a global lens, remember that the Big 4 accounting firms are present in ~160 countries worldwide, and each firm/country has its own flavor, feel, and specializations.

Cultural and geographical differences can shape the unique business environment and working atmosphere in all 4 firms. PwC Russia can differ from KPMG China, but PwC Russia will also be different from PwC India.

In one forum, a user described Big 4 firms in his location as:

“EY is regarded as the elitists, PwC the sweatshop, Deloitte the frat stars and surfer bros, and KPMG is the party firm”.

In another location, a user posted:

“EY is regarded as “condescending career monsters,” PwC as “overly proud audit robots,” Deloitte as “not as smart for other Big 4s”, and KPMG as “cute cozy harmless consultants.”

Stereotypes can be dangerous, and you shouldn’t generalize too much, but Big 4 firm offices can have a drastically different vibe in every country. Within each country, the offices in each city can vary in terms of specialty, culture, norms, etc. You can ensure your personality will work with your chosen firm by earning an office visit and meeting some of the firm’s team members.