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A brief history of the Big 4 Accounting Firms by small business accountant Sydney Part 1

A brief history of the big 4 accounting firms

You may have often heard of the term ‘Big 4’ amongst business accountants in Sydney. Many public companies undergo audits, the majority of which are carried out by a few accountancy firms. Given that the top four firms are usually employed for these audits, they are commonly known as the Big 4 of business accounting.

Prior to 2002, a fifth firm was part of the big boys – Arthur Andersen – which was eliminated from this group due to its part in the Enron Scandal. As part of Enron’s audit, Arthur Andersen was charged with falsifying financial records.

Even prior to this, this was a group of 8 big firms, which have now whittled down to four as a result of mergers and alliances. These are:

KPMG: KPMG which stands for Klynveld, Peat, Marwick and Goerdeler was originally a result of a merger of two smaller mergers of accounting firms. In 1911 William Barclay Peat & Co. and Marwick Mitchell & Co. merged to form Peat Marwick International (PMI), while later in 1979, Klynveld joined up with McLintock Main Lafrentz to establish Klynveld Main Goerdeler (KMG). The merger of PMI & KMG led to the formation of KPMG in 1987.

Ernst & Young: Ernst & Young started with one of its founders Arthur Young starting his first firm, Stuart and Young in Chicago in 1894. Around a decade later in 1903, Alwin and Theodore Ernst formed Ernst & Ernst in Cleveland. Fast forward to 1979 where, Ernst combined with Whinney, Smith & Whinney to form Ernst & Whinney, the fourth largest firm in the world. At the same time, Arthur Young saw major growth, which inevitably led to the formation of Ernst & Young in 1989.

Next week, we look at the remaining two of the Big 4, and shed some light on their history and how they came about. If you are a small business needing help with small business accounting in Sydney, contact m.a.s accountants now. We are the small business accountant in Sydney.

 
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