Photo of IAB editor Arvind HickmanGlobal accounting firms have made a steady recovery in the
past year following the horrific 2008/2009 fiscal year, where any
revenue growth was a cause for celebration.

Our 2011 world survey, launched this
month in London, reveals that 80% of networks and 60% of
associations posted revenue growth. This is a huge turnaround from
our report last year, where only 20% of networks increased global

Although it is true that some
developed markets, such as the US and Australia, have struggled in
the past year, firms grew in the majority of countries we

It too early to suggest this whole
recession business is dead and buried, especially as some
governments, such as the UK, implement severe austerity measures
that could yet destabilise GDP. However, it is important to note
that a lot of countries did not even have a recession. China,
India, Brazil, and several other emerging economies continued
remarkable growth while the West looked on.

The global financial crisis is not
quite as ‘global’ as some might suggest and it is these
fast-growing ‘new’ economies that are the engines of growth for
accounting firms.

The emerging economies may only
contribute 20% of PwC’s global revenue but this will rapidly change
as the power base shifts to more fertile ground.

Should governments

As Europe and other regions debate on
how to tackle audit market concentration one question that will
inevitably come up is whether governments should play a greater
role to encourage more choice in the marketplace. At present, we
have a situation where most of the largest multinationals in the
world are audited by four firms – PwC, Deloitte, Ernst & Young
and KPMG.

The fear held by regulators is that if
one of these large firms collapses the world’s capital markets
could be doomed, or something along those lines.

I, for one, do not believe a Big Four
collapse would be as catastrophic as the Battle of Armageddon but I
do believe Big Four bias exists and needs to be addressed in a
sensible and fair manner.

For a long time, auditors have been
adamant that market forces, and not politicians, should provide
robust solutions to dilute concentration. But a few prominent
voices, within and outside the profession, have given up on a
market-led solution and are calling for government

The first sensible step is to abolish
restrictive contractual lending clauses, often imposed by banks,
which force companies to select Big Four auditors. These clauses
discriminate against the mid-tier for no plausible reason and
should be outlawed.

Perhaps shared audits, where mid-tier
firms take on subsidiary work from a Big Four multinational client
is worth considering, as long as it does not affect audit

Another suggestion is that governments
should encourage public sector work to go to non-Big Four firms
where such work is reasonable for the mid-tier to carry out.

BDO chief Jeremy Newman believes
encouraging public sector bodies to consider a non-Big Four firm by
tweaking public sector procurement policies could set an example to
the private sector. But wouldn’t this merely impose another type of
‘restrictive’ mechanism that goes against the Big Four?

The Big Four are outstanding firms
that train the brightest finance professionals in the world.
Improving competition must not be an exercise in weakening them, it
must be focused on strengthening the rest of the pack.

I suspect the real battle for the
mid-tier needs to be won at the grassroots level – training enough
mid-tier captains of finance for the market to take a different
course. The Big Four have built an influential alumni over many
years through huge investment and unless the mid-tier can come up
with an answer to this, Big Four bias is set to stay – unless, of
course, the Battle of Armageddon is no myth.