Insider Business Club: mid tier vs big four

It’s not about the quality – the difference is only one of scale

Peter Wyman, head of professional affairs,

The difference between PricewaterhouseCoopers and, say Grant Thornton, isn’t
one of quality in the normal sense of the word, it’s all about scale; and scale
gives us breadth and depth of expertise, both here in the UK and around the

That equips us to audit those very large companies, and that probably rules
out, for a relatively small part of the market, firms like Grant Thornton. When
I was president of the institute I found huge quality from chartered
accountants, from small practitioners, through to middle-sized firms, through to
the large firms. There are actually many more firms than four, so a lot of the
discussion that we keep hearing about the fact that there’s only four, palpably
is not the case.

The fact is, for whatever reason, most (FTSE 350 companies) in the market
have chosen one of the Big Four. That doesn’t mean that there weren’t more than
four to choose from. Whether that is something that’s going to change over time,
or not, in some senses I don’t think it greatly matters. What does matter is
that that choice is there.

The clients that engage auditors are not stupid, and I don’t think they’re
acting on blind prejudice. Most audits are hard-won in a competitive tender, and
even if there isn’t a competitive tender on a regular basis, you have to
re-tender each year.

Audit committees are looking for a range of factors, of which price is
undoubtedly one, in making their decision – but what they actually want is the
best audit for their particular situation, which isn’t necessarily the cheapest

So I think it is competitive, but it shouldn’t just be a price-driven market.

The perception of restricted choice is overdone – the market decides

Richard Bennison, head of audit and board member, KPMG

It’s a fiercely competitive market. Increasingly we are seeing the Grant
Thorntons and the BDO Stoy Haywards come onto some of the tenders for the sector
down from the top 150 companies.

But I think we win because we prove for that particular client we perhaps
have the best team, the best industry credentials, and the right chemistry.

And at the end of the day, we find audit committees make decisions based on
who they believe are going to deliver the service that is particularly unique to
that client.

The perception that there is restricted choice I think is slightly over-done.
Firms will supplement their resources by bringing in industry expertise from
elsewhere, if needed, to compete on a big global account.

If we went to a Big Three, it’s certainly not something that I would favour.
I think four is a good number, I think that gives adequate choice for a client
that wants a firm as auditor, but then wants to use another firm, or another two
firms, to provide advice.

It’s up to the ‘significant others’, as the AIU calls them to, if they
believe that they have got credentials in certain market segments, to get those
credentials across to the decision makers. But it has to be the market that
drives competition, not regulatory change.

The competition the Big Four provides attracts the best people, and I think
audit is about people, it’s about people who make the right judgements, who are

And therefore the profession, and the profession in the UK, has been well
served by attracting the brightest, best people into it, and I think that would
be lost if we went to a nationalised industry.

Institutional prejudice is the key issue we come up against

Steve Edmunds, board member and head of entrepreneurial services,
Grant Thornton

A key (issue) that we come up against is what we call institutional
prejudice. Now that may seem a bit of a harsh way of describing it, but the
decision makers – in terms of audit reporting – sense that (they) have to prefer
perhaps a Big Four option, because that’s what the investors need, that’s what
the share-holders want. And our point, which I think we’re making very loudly,
is that a lot of that is based around perception rather than fact.

The mindset of a number of audit committee chairs or decision-makers is that
the default should be the Big Four, and the onus is on the mid tier to change

Organisations such as ours with 25,000 people in an international network
covering 110 countries, must have the resources to service many of those
1,200-odd companies adequately, indeed perhaps more flexibly and more nimbly
than the Big Four could, but very much on a level playing field.

Liability reform is critical. We have had a slight difference of view in the
past about liability reform, but the whole principle of attracting the best
people into the profession – if you put yourself in the shoes of a bright
graduate coming into our profession – it’s critical that liability reform is
sorted, to remove insecurity, potential insecurity and wholly unacceptable risk
that would otherwise be there.

We would urge the regulator to help with the process of dealing with the
perceptions of other, non-Big Four firms, rather than direct intervention. I
wouldn’t support a sort of radical breaking-up of the Big Four. I think that, to
endure, it has to be a market-led solution, frankly, rather than an artificial
regulatory intervention.

Watch the events and sign up at

Related reading