I am sure you’ve heard about the Big 4 accounting firms and (sort of) know what they do. But how do people earn a living there?
Also known as Assurance, this is the core service line of Big 4 accounting firms. You can learn more about what audit does here; but in general, the audit team reviews the financial statements of their clients and determines whether their financials are presented fairly and accurately.
What sets Big 4 apart from other public accounting firms? Publicly listed companies tend to only engage one of the Big 4 as their auditors. This is because the Big 4 audit team is perceived to have the experience to deal with the complexity in relation to listed companies, and therefore, able to protect a larger group of stakeholders (shareholders, investors and creditors). Many banks lend only if they see the Big 4 name on the audited reports.
This is how the Big 4 call their respective audit department:
We usually think of tax services as filing annual tax return. Big 4 tax provides such service for companies with global presence and complex structures.
Big 4 tax professionals develop their expertise as they deal with tax laws in different countries, and how they may affect each other. Also, they advice their clients on tax advantageous structures and strategies, and assist their colleagues in audit team on tax information in annual reports.
Everyone calls this department as Tax.
Consulting is a vague term, so what do they do? Client faces a challenge and the team tries to solve it.
It could be a big marco look at the company’s structure and suggest ways to steamline operations (e.g. improve supply chain management); or it could be restructuring a division, or setting up a new ERP system from scratch. When compared to traditional management consulting firms, Big 4 consulting’s strength is on risk management, compliance and IT.
A big theme that people interested in Big 4 should know is independence. 10 plus years ago, Big 4 consulting was such a profitable business that Big 4 (back then, Big 5) were willing to undercut their audit fees to gain consulting business. This impaired their judgement in the audit work, leading to the Enron and Worldcom scandals.
After that, the Sarbanes-Oxley Act was enacted to separate consulting business from these audit firms. Specially, the firm has to remain independent as an auditor and cannot have financial interest (such as consulting work) with that particular client. This doesn’t lead to the end of Big 4 consulting — nowadays one of the Big 4 takes the audit while the other three can get the consulting business.
You may also want to know that Accenture (which used to be part of Arthur Anderson) is now the biggest player in the consulting industry.
This is how the Big 4 call their respective consulting department:
Better known as the “transaction” group, this team advises clients on corporate finance activities, such as mergers and acquisitions, spin-offs and other changes in company structure.
Big 4 make great advisors because they are among the best people to identify accounting and tax implications from the transactions.
To provide a more holistic service, the advisory team often provides full service such as identifying acquisition targets, performing analysis with complex financial models and due diligence. This put them in direct competition with investment bankers.
This is how the Big 4 call their respective transaction / advisory department:
The Big 4 accounting firms are constantly evolving to meet new needs in the business community. For example, PwC and EY have a Climate Change and Sustainability service; Deloitte has a Human Capital group serving clients’ HR on talent retention and development; and KPMG has a group called Enterprise to provide a combination of consulting and transaction service to small and family business owners.
Even if you aren’t keen on audit, tax and consulting, there are lots of other opportunities within Big 4 that may match your interest.
We have a series on Big 4 hiring, starting with this post on Big 4 info session.
Service Line description from official websites:
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