The History & Future of the Big Four
Accounting firms, large and small, should anticipate structural changes in the industry. Accountants and financial consultants can learn quite a bit from the history of the Big Four accounting conglomerates. The structure of power has changed quite a bit from how it looked in the beginning of the twentieth century. Furthermore, it will continue to change into more specialized groups within larger organizations who specialize in more nuanced services while remaining aligned in the goal of advising their clients.
History of the Big Four
In 1910, the “Big Four” were still made up of eight smaller accounting firms: Arthur Andersen, Coopers and Lybrand, Ernst & Whinney, Deloitte Haskins & Sells, Peat Marwick Mitchell, Price Waterhouse Touche Ross, and Arthur Young. Now, however, the original firms have merged and consolidated into four professional service conglomerates: PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young (EY), and KPMG. 
Though a third of their business consists of audits on Fortune 500 companies, 65 percent of their revenue is derived from financial consulting services concerning regulations, financial transactions, mergers, acquisitions, business strategy, and operations—among other services.
Historically, there has been a “university to Big Four pipeline,” according to Bloomberg BNA. Since the infamous Enron scandal of 2002, wages have stagnated and labor shortages at more traditional accounting firms have been forced higher wages than is financially lucrative for them to be able to compete with major conglomerates for new employees. 
If the Big Four accounting firms aren’t merely accounting firms, why is that so? And in what other ways is the industry changing?
From Accounting to Consulting
The Big Four conglomerates focus primarily on consulting, now, because the nature of business is changing. In addition to tax reporting becoming more automated via artificial intelligence (AI), cloud computing, and tax reporting software, there are also the social implications and sometimes legal ramifications that result from auditors and clients working together.
The Economist writes, “The perception that auditors and clients are hand-in-glove, fair or not, is a reason why shareholders of Bear Stearns sued Deloitte along with the defunct bank.”  Moreover, the European Commission in Brussels recently proposed creating audit-only firms in the European Union, but European Parliament opposed the idea.
Since the Big Four conduct so much business related to wealth management and tax consultation, rather than auditing, this conflation will likely remain an issue. Meanwhile, multinational corporations and high-income individuals have global stock portfolios and file international tax returns. They are in need of highly-specialized tax consultants to help minimize tax payments to the IRS, as well as for individuals to maximize their return on investments.
But what are the ongoing concerns and mitigating factors? And how is technology changing the role of accountants and taxation law professionals?
New Business Concerns & Technology
Despite the burgeoning prevalence of tax automation, accounting professionals now have a variety of options available to them. There is a growing need for judicial clerks, financial planning consultants, certified public accountants, lawyers, and tax law associates.
Businesses and multinational Fortune 500 corporations must comply with oversight legislation like the Sarbanes-Oxley Act, making sure their international offices and business investments are secure, transparent, and in alignment with investor interests, as well. 
The difficulty in all this lies in balancing the interests of companies’ board of directors, C-suite executives, employees, and shareholders—as well as the interests of the public good and the corporate world at large. Publicly traded companies are becoming more aware of the financial need to remain transparent and put forth a code of ethics to retain an ever-evolving customer and investor base.
Ongoing Tax Reform Developments
According to Russ Alan Prince, rather than focusing solely on tax reform and accounting services, accountants should adopt strong interpersonal skills and move beyond time-based compensation. By providing high realization rates and high margin specialty practices, smaller firms can remain competitive in markets providing services related to wealth management and business coaching. 
Because so much of the accounting market is being replaced by AI and tax automation software, Mark Koziel recommends creating “a road map for remaining relevant” consisting of strategies, actions, and focus areas. For example, Koziel draws attention to the importance of a dynamic workplace culture that embraces innovation and change, and well as reevaluating your firm’s career track. He recommends a robust research, training, and development department that includes inclusivity, training, and intentional recruitment—as well as thinking globally and utilizing social media benefits. 
If we are, indeed, “right on the cusp of tax reform, not only here in the U.S. but around the world,” it will take a rigorous education based in real-world taxation law and accounting practices to apply this newfound rigor and innovation to current times. * * *
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