Large public accounting firms generally perform the audits of companies traded on public stock exchanges. Major publicly traded corporations, as well as large private organizations, generally engage one of the four largest public accounting firms. These firms are collectively known as “The Big 4.”
These firms enjoy a great deal of respect and prestige and are considered the pinnacle of the public accounting profession. At the same time, it is universally agreed that these firms, and the public accounting profession in general, owe a debt to the public trust and that, while they work directly for the companies that hire them, they also provide invaluable services to the community at large.
The Big Four are:
Each firm is actually a network of member firms with offices in many cities worldwide. Each of the Big Four has approximately 100 offices located throughout the U.S. alone.
There are also hundreds of small to medium-sized professional accounting and CPA firms in cities across the country, most of which practice within one state or within a targeted region.
For the better part of the 20th century, the largest international accounting firms were known as the “Big Eight”, but by 2002 a series of mergers, as well as a well-publicized scandal, reduced this list to the “Big Four.”
One need only recall the Enron and WorldCom accounting scandals of 2001 and 2002 to understand the damage that can be done when public accounting professionals fail to fulfill their duties to their clients and to the public. As a result of accounting fraud committed by Enron and WorldCom, both major publicly traded organizations went bankrupt, employees lost their jobs and their pensions, and investors sustained massive losses on the stock market.
In addition, the reputation of the major accounting firm Arthur Andersen LLP was tarnished because of its role in auditing Enron and WorldCom, and, consequently, it was dissolved.