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GAO Says Four Accounting Firms is Enough

Even though the four largest accounting firms continue to audit almost all large public companies, concentration in the marketplace poses no immediate threat to fee competitiveness, the Government Accountability Office (GAO) concluded in a recent report.

By Staff Writer | Updated on February 01, 2008

Even though the four largest accounting firms continue to audit almost all large public companies, concentration in the marketplace poses no immediate threat to fee competitiveness, the Government Accountability Office (GAO) has concluded in a report. According to the GAO report, which included a survey of 600 large, medium, and small public companies, 82% of large public companies–essentially the Fortune 1000–saw their choice of auditor as limited to three or fewer firms. About 60% told the GAO that they viewed competition in their audit market as insufficient. Most small public companies, with far more options in the audit market, reported being satisfied with the auditor choices available to them. Survey participants also raised concerns about whether current proposals to encourage new entrants into the audit marketplace–including a plan to cap auditor liability and creation of a federal office to share technical expertise–could work. None were widely supported, according to the report. Although fees rose significantly in recent years, the GAO attributed the hikes to expanding accounting and auditing rules and higher costs for accounting firm personnel rather than concentration.

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