The Financial Audit Of The World 's Financial Audits

896 WordsJan 12, 20164 Pages
The majority of the world’s financial audits are dominated by four major audit firms, which are known as the “Big 4” (PricewaterhouseCoopers, Ernst & Young, KPMG, and Deloitte). Prior studies suggest that these firms, on average, provide higher quality audit services and also exhibit a fee premium in comparison with their non-Big 4 audit firms; however, it is questionable that whether all these Big 4 audit firms are the same and that whether there are differences in audit quality within the Big 4. In term of total audit fee dollars, PwC maintains its leadership position among the Big 4 (Appendix A, table 1), followed by Deloitte, Ernst & Young and KPMG. In 2014, PwC generated $15 billion from its audit service – 44% more than those earned by KPMG. PwC also ranked as the most prestigious accounting firm (Appendix A, table 2) in 2015 according to the Vault’s annual Accounting Survey as reported in table 2, followed by Ernst & Young, Deloitte and KPMG. Following qualitative responses are also taken during the Vault’s survey to describe their perception of firms other than their own: “Most prestigious of the Big 4” “Very aggressive firm but over-promises in the marketplace” “Doesn’t seem to care about audit anymore” “Overworking employees beyond every other firm” “Not a good work/life balance” “Big 3’s kid brother” “Least prestigious of the Big 4”. These responses indicate potential variations within the Big 4 firms based on the outside perception of a firm. In this study, I
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