EU audit reform may boost Big Four's IT ambitions – IDC
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Calls to break up the "oligopoly" in auditing will drive Ernst & Young, Deloitte, PwC and KPMG to pursue more IT business, says market researcher
The European Union has called for the dominance of the auditing industry by the Big Four accountancy firms – Ernst & Young, Deloitte, PricewaterhouseCoopers and KPMG – to be broken up, after the financial crisis revealed shortcomings in the current model.
"Investor confidence in audit has been shaken by the crisis and I believe changes in this sector are necessary," said EU commissioner Michel Barnier yesterday,
Barnier has proposed a plan to break up the Big Four's auditing divisions from their advisory units, which include IT consultancy.
According to IDC analyst Douglas Hayward, this could accelerate the Big Four's pursuit of IT-related consultancy work "by establishing a clear division between audit work and IT/business services".
"We suspect the Big Four will defend their privileged place among enterprise ICT buyers by doing just enough to provide full-service offerings," Hayward wrote in a research note.
Much of the current IT services sector is based on the former consultancy practices of Big Four firms. Ernst & Young sold its consultancy practice to Capgemini in 2000 and PricewaterhouseCoopers sold its unit to IBM in 2002, following accusations of conflicts of interest.
If the EU forces these firms to make sure there is no conflict of interest by splitting them apart, they would be free to pursue IT business unbounded.
