Editing Big Four accounting firms (section)

=== Market concentration and alleged collusion amongst the Big Four ===
In the wake of [[industry concentration]] and the occasional firm failure, the issue of a credible alternative industry structure has been raised.<ref>{{Cite SSRN |title=Too Big to Fail: Moral Hazard in Auditing and the Need to Restructure the Industry Before it Unravels |ssrn=928482}}</ref> The limiting factor on the expansion of the Big Four to include additional firms, is that although some of the firms in the next tier have become quite substantially large, or have formed international networks, effectively all large public companies insist on having an audit performed by a Big Four network. This creates the complication that smaller firms have no way to compete well enough to make it into the top end of the market.

Documents published in June 2010 show that some UK companies' [[Contractual term|banking covenants]] required them to use one of the Big Four. This approach from the lender prevents firms in the next tier from competing for audit work for such companies. The [[British Bankers' Association]] said that such clauses are rare.<ref>{{Cite web |title=Big-Four-only clauses are rare: BBA |url=http://www.accountancyage.com/accountancyage/news/2264992/big-four-clauses-rare-bba |url-status=dead |archive-url=https://web.archive.org/web/20100621014525/http://www.accountancyage.com/accountancyage/news/2264992/big-four-clauses-rare-bba |archive-date=2010-06-21 |website=accountancyage.com}}</ref> Current discussions in the UK consider outlawing such clauses.

In February 2011, the [[Office of the Director of Corporate Enforcement|Irish Director of Corporate Enforcement]] Paul Appleby said that auditors "report surprisingly few types of company law offences to us", with the so-called "big four" auditing firms reporting the least often to his office, at just 5% of all reports.<ref>{{Cite news |date=11 February 2011 |title=Appleby and Revenue query work of auditors |publisher=Independent.ie |editor-last=Oliver |editor-first=Emmet |url=https://www.independent.ie/business/irish/appleby-and-revenue-query-work-of-auditors-26705531.html |access-date=26 October 2020 |archive-url=https://web.archive.org/web/20201026202021/https://www.independent.ie/business/irish/appleby-and-revenue-query-work-of-auditors-26705531.html |archive-date=26 October 2020}}</ref>

In 2011, the [[House of Lords]] of United Kingdom completed an inquiry into the financial crisis, and called for an [[Office of Fair Trading]] investigation into the dominance of the Big Four.<ref>{{Cite news |date=30 March 2011 |title=Auditors criticised for role in financial crisis |work=Financial Times |url=http://www.ft.com/cms/s/0/358b366e-59fa-11e0-ba8d-00144feab49a.html |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/cms/s/0/358b366e-59fa-11e0-ba8d-00144feab49a.html |archive-date=2022-12-10 |url-access=subscription}}</ref> In September 2019, [[Bloomberg News]] reported that The Big Four controlled 95% of the FTSE 250 audit market by client numbers and 96% by market capitalization in August 2019, according to Adviser Rankings.<ref>{{Cite news |last=Kapoor |first=Michael |date=September 1, 2019 |title=Big Four Still Dominate U.K. Large-Company Audits, Survey Shows |publisher=Bloomberg |url=https://news.bloombergtax.com/financial-accounting/big-four-still-dominate-u-k-large-company-audits-survey-shows}}</ref>

In 2018, an Australian parliamentary committee was told that the heads of the Big Four firms have met regularly for dinner. The revelation was among issues which led to an inquiry by the [[Australian Competition & Consumer Commission]] into possible collusion in the selling of audit and other services. However, Ernst & Young told the inquiry that the dinners, which were held once or twice a year, were to discuss industry trends and issues of corporate culture such as inclusion and diversity.<ref>{{Cite news |last1=Tadros |first1=Edmund |last2=McIlroy |first2=Tom |date=15 February 2019 |title=Big four left guessing over dinner guests |page=10 |work=[[Australian Financial Review]]}}</ref>

The January 2018 collapse of the UK construction and services company [[Carillion]] raised further questions about the Big Four, all of which had advised the company before its liquidation. On 13 February 2018, the Big Four were described by [[Member of Parliament (United Kingdom)|Member of Parliament]] (MP) and chair of the [[Work and Pensions Select Committee]] [[Frank Field (British politician)|Frank Field]] as "feasting on what was soon to become a carcass" after collecting fees of £72m for Carillion work during the years leading up to its collapse.<ref name="Davies-13Feb2018">{{Cite news |last=Davies |first=Rob |date=13 February 2018 |title=Carillion: accountants accused of 'feasting' on company |work=[[The Guardian]] |url=https://www.theguardian.com/business/2018/feb/13/carillion-accountants-accused-of-feasting-on-company |access-date=13 February 2018}}</ref> The final report of a Parliamentary inquiry into the collapse of Carillion, published on 16 May 2018,<ref name="Davies-16May2018" /> accused the Big Four accounting firms of being a "cosy club", with KPMG singled out for its "complicity" in signing off on Carillion's "increasingly fantastical figures" and internal auditor Deloitte accused of failing to identify, or ignoring, "terminal failings". The report recommended the Government refer the statutory audit market to the [[Competition and Markets Authority]] (CMA), urging consideration of breaking up the Big Four.<ref name="Davies-16May2018" /> In September 2018, [[Secretary of State for Business, Energy and Industrial Strategy|Business Secretary]] [[Greg Clark]] announced he had asked the CMA to conduct an inquiry into competition in the audit sector,<ref name="Busby-29Sep2018">{{Cite news |last=Busby |first=Mattha |date=29 September 2018 |title=Audit sector faces inquiry as minister points to deficiencies |work=The Guardian |url=https://www.theguardian.com/business/2018/sep/29/uk-mulls-audit-sector-reform-after-minister-admits-deficiencies |access-date=29 September 2018}}</ref> and on 9 October 2018, the CMA announced it had launched a detailed study.<ref name="CMA-9Oct2018">{{Cite web |title=CMA launches immediate review of audit sector |url=https://www.gov.uk/government/news/cma-launches-immediate-review-of-audit-sector |access-date=9 October 2018 |website=Gov.uk}}</ref> In July 2020, the UK [[Financial Reporting Council]] told the Big Four that they must submit plans by October 2020 to separate their audit and consultancy operations by 2024.<ref name="BBC-6Jul2020" />