Question

Critically evaluate the problems associated with big four accounting firm dominance
and identify potential solutions.

Answer 1

• There is deep rooted problem associate with big firm accounting firm. The audit work of big four accounting firm has been compromised and needed serious review by national committee. The percentage of audit market captured by big four accounting firm has been associate with issue such as market dominance and conflict of inteinterest. Now a days big four accounting firm are handling accounting as well as auditing which has lead to compromise of Independent review of corporate working. The major risk associate with big four accounting firm is audit reviewed done by them lacked desired audiurance that financial statements is free from material misstatement and representing fair view. For big four accounting firm, auditing has became side business and they are growing in consultancy business which has increased the risk of compromise on independent review. They have created competitive disadvantage to small and mid size firm.
• Solution to solve issue related with big four accounting firm, their business of consultation and auditing should be segregated. Restrict standard law should be imposed on them. Cap limit should be defined on number of corporate company they can handle. Fines and penalties must be imposed for not abiding by the standard. Consulting business and auditing business should not be handled by the same person. Rules with respect to rotation of firm after specified year must be implemented so that it will create competition in market.