You know you are getting old if you remember when the world’s leading auditing firms were called the Big Eight. Now that we are down to the Big Four, there is growing concern that they constitute an oligopoly where members are “too big to fail”.
The predominance of PwC, KPMG, EY and Deloitte has stunted the development of rivals, to the point that the UK has proposed forcing its biggest businesses to hire two auditors, one from outside the Big Four. Independent auditors are crucial to the operation of capital markets and to public trust in companies generally, so stifling competition and the benefits that come with it is a serious problem.
Can anything be done about it? Based on my experiences, I think so, but the UK proposal does not go far enough. Back in April 2012, I was appointed to monitor five court settlements between the US and 49 state governments on the one hand, and the five largest home mortgage servicers (Bank of America, JPMorgan Chase, Wells Fargo, Citi and GMAC) on the other. I was charged with validating that the banks were granting relief to distressed borrowers and complying with conduct rules for handling distressed loans.