Killik Explains: Should the 'Big Four' be broken up?

Following a string of embarrassments, including the Carillion collapse, critics want to end the dominance of the accounting giants. Tim Bennett investigates.

[deathmetaldxb]

His videos are always awesome! Would love to see him get more involved in Cryptocurrency & Blockchain Technology

[slpy]

Wouldn't the main issue of auditing be that they're paid by their client for the audit work performed? If this is not addressed, a breakup of the big four would simply increase the competition between the audit firms, and the more incentivised then for the audit firms to please their client, making the process less independent?

[Artonox]

There is another problem underlying the audit industry in general as to why external audit isn't as effective as it should be other than consulting incentives.

With audit quality, due to the extremely high workload (busy season), low relative pay and low level of learning (including a large variance on the level of inhouse coaching), and where the management knows their own company far better than the external auditors, you tend to have ineffective middle management and sometimes low morale amongst audit teams. There is a reason why there are high staff turnover at these companies, because it is difficult for them to maintain incentives for the good auditors to stay. As such, there is downward pressure on audit quality, such as where external audit, at least, basically have no teeth to critically analyse the accounts of these big companies.

Breaking up the big 4 won't necessarily increase the quality of audit because there are other more rooted factors at play.