Learn how a pioneering firm ushered in a global transformation in the world of auditing and professional services.
Introduction
The modern public accounting and auditing industry was not always dominated by so-called Big FourThe path to reaching this select group of firms began at the beginning of the 20th century, driven by the vision of leaders such as Arthur AndersenIn this article, we explore how these major firms emerged, the role Andersen played in their development, and how corporate scandals redefined the current landscape.
Who was Arthur Andersen?
Arthur Edward Andersen (1885–1947) was a Norwegian-born American public accountant, known for his unwavering professional ethics and for founding one of the most influential firms of the 20th century: Arthur Andersen & Co.
At 23, Andersen became the Illinois' Youngest CPAIn 1913, he founded his firm in Chicago, driven by a principle that would define his legacy:
"Think straight, talk straight."
This motto defined a clear position: accountants should be independent professionals, without compromising the truth for commercial interests.
The growth of Arthur Andersen & Co.
For decades, Arthur Andersen & Co. It was synonymous with excellence, especially in financial auditing and accounting consulting. It earned a reputation as a firm that would not cave in to client pressure, even if it meant losing multimillion-dollar accounts.
From the 1960s and 1970s, the firm grew exponentially thanks to two lines of business:
- Traditional auditing and accounting services
- Technological and management consulting (through its division Andersen Consulting)
How did the Big Four come about?
Before the Big Four, there were the Big Eight, then the Big Six and later the Big FiveMergers, acquisitions, and the collapse of Arthur Andersen transformed the global landscape of professional services.
📌 Historical evolution:
| Time | Dominant firms |
|---|---|
| 1970s | Big Eight: Arthur Andersen, Coopers & Lybrand, Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, Touche Ross, Arthur Young |
| 1980s | Mergers create the Big Six (Ernst & Young, Deloitte & Touche, etc.) |
| 1990s | More mergers → Big Five: Andersen, Deloitte, PwC, KPMG, Ernst & Young |
| Since 2002 | Arthur Andersen's Collapse → the birth of the Big Four current |
The Enron scandal and the fall of Arthur Andersen
The breaking point came in 2001 with the case Enron, a US energy company that inflated its revenues through fraudulent financial structures.
Arthur Andersen, as Enron's external auditor:
- He was accused of destroying key documents.
- He lost his license to audit public companies in the U.S.
- Although he was later exonerated by the Supreme Court, it was too late.
The firm disintegratedThousands of employees migrated to other consulting and auditing firms, thus ending one of the most important chapters in modern accounting.
Who are the Big Four today?
The four firms that dominate the global audit, consulting and tax services market are:
- Deloitte
Founded in 1845 in London, it is now the largest in terms of global revenue.
Offers auditing, consulting, risk, tax and financial advice. - PwC (PricewaterhouseCoopers)
Result of the merger between Price Waterhouse and Coopers & Lybrand in 1998.
Strong presence in auditing and consulting for corporations. - EY (Ernst & Young)
It emerged in 1989 from the merger of Ernst & Whinney with Arthur Young.
It excels in auditing, consulting, and legal and tax services. - KPMG
Acronym for Klynveld, Peat, Marwick, Goerdeler.
Offers auditing, advisory, and global tax services.
Conclusion
Arthur Andersen's story is a lesson about Leadership, integrity, and the consequences of ethical collapseAlthough his legacy was tarnished by the Enron scandal, his vision laid the foundation for what we know today as the global professional services industry.
The Big Four They are the result of decades of evolution, mergers, and transformations. Understanding their origins helps us understand how empires are built—and destroyed—in the financial world.
0 Comments