Big Four (Big4) is the four largest professional accounting firms in the world including PwC, KPMG, EY and Deloitte. These firms handle most of the audit work for the largest publicly traded companies in the world as well as many other private companies, creating a monopoly in the global audit industry.
Considering the total revenue of $40.6 million, EY was the top earning firm last year following by PwC with $37 million, Deloitte with $28.3 million and KPMG with $19.7 million.
The transparency report of PwC shown that the revenue from auditing service was only $873,000 in 2017, while its total revenue went up to $37 million. Thus, the auditing revenue was only accounted for two percent of the total revenue.
Although the total revenues of Big4 are quite large, the profits of Big4 in Vietnam are relatively small. In 2017, EY’s profit was $254,000 and as for KMPG, their profit was only $34,000.
High staff cost is the main factor contributing to the extremely low profits of Big4, which accounts for 60 percent to 70 percent of the total cost.
Specifically, across the globe KPMG spent $14 billion for staff cost in 2017, equivalent to the average staff cost per auditor is $351,000 per year. EY has the highest average staff cost, about $373,000 per person annually.
This figure is fairly different comparing to other auditing companies in Vietnam asides from Big4, such as AASC, a large-scale audit firm in the domestic market that has an average employee cost of about $88,000 per person annually.
In addition, the competition amongst auditing units becomes increasingly brutal over the years. Not only Big4 but also some other large audit firms such as A&C, AASC and AAC also join the race of obtaining auditing packages for businesses through discounting their services.
KPMG had to reduce their price up to 47 percent to win one of the very large scale bidding packages namely auditing package for 2016 - 2018 financial statements of Vietnam Airlines, which had a value of $517,000.
Even Deloitte Vietnam had to offer a discount to win an over $440,000 package, of which Deloitte will have to provide a review service for semi-annual financial statements, audit annual financial statements and audit the operation of the internal control system of BIDV for the fiscal year of 2016 and 2017.
Big4 has been in Vietnam since the day the country opened its market to the world. As the domestic economy becomes more integrated into the world, the position of Big4 also enhances significantly.
Currently, most of the largest capitalization companies in Vietnam such as Vingroup, Vietcombank or Mobile World are all customers of Big4 auditing companies.