Big 4 Oligopoly

Do not pass go, do not collect $200 🧐 👀

The Big 4 firms average a 40% audit deficiency rate and nobody seems to care.

😏 That’s the protection you get when you’re part of an oligopoly.

Here’s what Columbia Business school accounting professor Shivaram Rajgopal told Fortune magazine.

—----------------------

“The Big Four have formed what essentially amounts to an oligopoly over the accounting market, which has diminished incentives for quality-based competition.”

“Investors are blissfully unaware,” said Rajgopal. “Once [the PCAOB’s] reports [came] out, did anything change?

Did the stock prices of companies audited by these four [accounting firms] fall? No…[Investors] just assume the system works.”

—----------------------

😲 Four firms audit 100% of all Fortune 500 companies. A clean audit report from the Big 4 is still seen as the gold standard.

It's safe to say, the Big 4’s dominance isn’t threatened by smaller firms.

If Big 4 messes up, they pay a fee and go back to dominating the market.

Make the most of your accounting career with the No Flux Given playbook