The ‘Big Four’ audit firms of Deloitte, PwC, Ernst & Young (EY), and KPMG made a record $203.8 billion collectively in the 2023 financial year, up from $190 billion last year.
Deloitte led the pack, generating $64.9 billion in global revenue, with the others over $10 billion further back.
In second, PwC generated $53.09 billion, ahead of EY, with revenue of $49.4 billion.
KPMG was the group’s laggard, sitting in a distant fourth and with nearly only half of Deloitte’s revenue at $36.4 billion.
KPMG and Deloitte have histories spanning well over a century, with KPMG being founded in 1817 and Deloitte in 1845.
Deloitte has grown from a single London accounting firm to a global behemoth with over 300,000 employees.
EY and PwC are modern creations in comparison, with EY being formed in 1989 from a merger of Ernst & Whinney and Arthur Young & Co.
PwC emerged in 1998 through the merger of Price Waterhouse and Coopers & Lybrand.
The Big Four firms came to dominate the world of auditing around the world in the late 20th century through a series of mergers and acquisitions.
This consolidation led to greater market share, global reach, and diversification of services beyond traditional auditing. They now offer everything from tax consulting to risk management to cyber security.
The Big Four’s dominance has attracted criticism regarding conflicts of interest, audit quality, and lack of competition.
Some high-profile corporate scandals have raised concerns about their effectiveness in detecting and preventing financial irregularities. Regulatory scrutiny and calls for reform are ongoing.
Despite the challenges, the Big Four are expected to remain significant players in the professional services industry.
Their vast resources, global reach, and diverse service offerings give them a strong competitive advantage.
All four have significant operations in South Africa, providing services to many JSE giants and private businesses.
It is difficult to determine how much money they make in the country as most report on Africa as a continent and give little detail about individual countries.
In Africa, PwC generated just over R11 billion ($600 million), while Deloitte made R7.2 billion.
KPMG details its South African operations in its annual report, which revealed that the firm made R2.2 billion from its local operations in 2022.
For its Europe, Middle East, and Africa regions, EY generated revenues of R314.8 billion ($17.1 billion).
These immense global revenues come when the audit profession in South Africa faces significant headwinds, particularly the loss of skilled workers to emigration and other careers.
Independent Regulatory Board for Auditors (Irba) CEO Imre Nagy said most of the country’s top audit firms have flagged the profession’s attractiveness as a growing challenge.
The industry lost its lustre because of high entry requirements to study accounting, high tuition fees, low pay, high work stress, and negative publicity about the auditing profession.
The skills shortage is exacerbated by low maths literacy in South Africa, which significantly reduces the number of students able to study accounting.
In addition, several push-and-pull factors, such as political and socioeconomic instability, drive the emigration of highly skilled professionals.
Irba recently accredited the Association of Chartered Certified Accountants (ACCA) as an additional professional accounting body to address the skills shortage.
This will provide another route to the audit specialisation programme for aspiring auditors.
Irba is also undertaking a situational analysis to restore confidence in the role of auditors and the regulator.
This includes closer collaboration with auditors without compromising the regulator’s independence.
Irba aims to issue a discussion paper next year to highlight the top five gaps identified in the ecosystem with recommendations that will address these gaps.