The Big Four: Who's Winning the Accounting Race?

by Cesar Bacani, 25 January 2012

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topics:
Accounting and Regulations

tags:
Deloitte Ernst & Young KPMG PwC

And the winner is . . . PricewaterhouseCoopers.

PwC had a record-breaking 2011, with total billings of US$29.9 billion. Deloitte, the biggest revenue earner in 2010, was pushed to second place with its 2011 sales of US$28.8 billion.

All the Big Four accounting firms had a remarkable 2011, actually. According to our friends over at Big4.com in The 2011 Big Four Firms Performance Analysis, PwC, Deloitte, Ernst & Young and KPMG “had a blockbuster year in 2011, their combined revenues reaching an all-time high of US$103 billion.”

Does it matter? Perhaps it does, for CFOs – or more to the point, investors and other stakeholders – who care about how the company’s external auditor performs in relation to its peers. In terms of reputation, the top revenue earner can be regarded as the world’s accounting firm of choice, and as such, is perceived to be the leader in terms of resources, experience and expertise.

The 2011 results is a reversal of the 2010 league table, when Deloitte nabbed the top spot with billings of US$26.578 billion, just US$9 million more (a paper-thin difference of 0.03%) than PwC’s US$26.569 billion. PwC came roaring back last year – its revenues are 1.5% larger than Deloitte’s.

Ernst & Young came in at No. 3, with revenues of US$22.9 billion, up 7.6% in US dollar terms from US$21.2 billion in 2010. But fourth-ranked KPMG is catching up. Its billing reached US$22.7 billion last year, up 9.7% from US$20.7 billion in 2010 – a growth spurt that’s two percentage points more than E&Y’s.

Revenues of Big Four Accounting Firms

Counting on Emerging Markets

The global economy’s recovery and strong GDP growth in emerging markets (especially Asia) in the first half of the year accounted for a significant part of the Big Four’s record performance. Asian revenues surged 17.4% to US$17 billion. That’s the seventh year in a row that Asia was the fastest growing region for the audit firms.

At 17%, Asia is still the smallest region in terms of Big Four revenues – EMEA (Europe, Middle East and Africa) accounted for less than 44% last year, while the Americas had 40%. However, slower growth in total revenues in Europe (5.4% from 2010) and the US (9.9%) could mean that Asia will eventually equal or surpass these two developed regions.

It remains to be seen whether 2012 will be another historic year for the Big Four. Europe’s financial crisis bubbled over late last year and now threatens to spill over to emerging markets, particularly open, export-oriented economies like Hong Kong, Singapore and Taiwan.

But the Big4.com analysts are upbeat. “The outlook for 2012 and beyond is quite optimistic,” they reckon. “Revenue is expected to grow at a good pace, with help from emerging markets, advisory services, conversions to IFRS and favourable economic conditions.”

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