The Big Four accounting firms, which comprise Ernst and Young, Deloitte and Touche, KPMG and PwC, have become too big to fail, said a Harvard Business School expert. For this reason, most small audit companies have given up on surviving the industry, yielding to mergers with the Big Four organization of their liking. That is, if they have shown promise and are fortunate to have impressed one of the Big Four. Are small audit firm Singapore bound to monetary risks by consolidating with the Big Four firms?
Experts theorize that in some way, the relationship of surviving accounting organizations and regulators would be affected and so do accounting rules and capital markets. Big auditors, of course, will become more secure in their position when it comes to their relationships with accounting regulators. This means they would be more lax in their duties and wouldn’t be that worried about the consequences of their decisions.
On the other hand they could become risk averse since their decreasing numbers could make them easy targets. They may also tend to focus more on their client’s needs since they would feel less pressure to compete with other industry players. This could be what Singapore accounting firms have been doing already, since the industry has managed to position itself as Asia’s foremost accountancy hub. By refocusing its resources and diversifying it services, e.g. offering secretarial services Singapore, it has managed to stay afloat as well despite ongoing economic crisis.
The oligopoly tightening, as studies show, is based on the increased worries of audit firms with their potentially compromised reliability and litigation processes. The phenomenon, in fact, can be attributed to the changing membership of regulators, macroeconomic pattern changes, fair-value-based accounting and total stock market performance.
Unless more research is created on this issue, specialists and economists could only speculate of what’s going on with the industry in the context of globalization, information technology and banking.