It can be argued that the reason the audit industry has become increasingly concentrated
and is now dominated by 4 key players is because auditors managed to develop sector
knowledge in certain industries they serviced. Research suggests that duopolies exist
within the Accounting Oligopoly whereby two of the big four are ‘duopolists’ in particular
industries they audit for example, in the US, Pwc and Deloitte handle over 90% of audits
in the utilities sector while EY and Pwc service over 75% of the audits in the IT
industry(reference).
Write about what big four are doing to deter entry and how legislation is gonna pave way
for new freaks to enter market (retendering, possible rotation)
(write about how the consulting industry is charactarzied by high turnover and that one
way new entrants can come in is to steal key players and start merging with their strengths.
We believe that it is possible for a new entrant to capture some of the big fours market
share and dilute the audit market. Since it is in the interest of both the government and of
non-big four audit firms to increase competion in the market we looked at strategies for
both a new entrant and for governments and regulatory agencies to make this possible. We
therefore present strategies to dilute the audit industry for both governments and existing
firms.
The big four have been successful in their efforts to safeguard their intrests. They are
extremely powerful agencies, with a global outreach and significant capital, they have
continuously lobbied to maintain their position in the market. After the demise of Arthur
Anderson, it became apparent that the government and regulatory agencies were
overlooking the giants indiscretions in order to prevent another one of them from failing
and consequently concentrating the market further (Pai, 2011).
Although the Big four have been the dominant force in the Audit industry for the better
part of the 20th century, the legislative landscape surrounding the audit industry is slowly
but surely evolving in an attempt to decrease concentration and ultimately increase
competition in the audit market. Regulators have been tiptoeing around the big 4 fearing
that a failure of one of those giants would have significant financial repurcussions. While
those concerns have some validity neither the global community nor the government
regulators can afford for the big 4 to disregard legal regulatory and ethical standards (Pai,
2011). The regulatory agencies and the government need to re-think the situation and
