ABSTRACT

This paper examines the evidence that government regulators have been captured by the Big 4 accounting firms. For the past couple of decades, the auditing services marketplace has been characterized as an oligopoly. With the criminal indictment of Arthur Anderson in 2002 and the resulting collapse of that firm, the then Big 5 accounting firms were reduced to the Big 4. Government regulators acknowledge that the increased market power of the Big 4 firms has negative implications, some with possibly severe consequences for global financial markets. But Federal accounting regulators, however, have failed to indict any of the Big 4 for known criminal actions. The failure to indict any of the Big 4 accounting firms for criminal actions causes the skeptic to question if government regulators have been captured by the key market players that they are charged with overseeing. If this is the case, the public interest has been compromised by the regulators’ mental attitude that the Big 4 firms are not only “too big to fail”, but they are also “too large to indict.” Because of the global dominance of the Big 4 in the auditing services marketplace, our financial markets face possible turmoil. The paper provides suggestions to protect the public interest and to help rectify the market power of the Big 4.

Capture Of Government Regulators By The Big 4 Accounting Firms