The Big 4 Global Monopoly

Why did companies audited by one of the Big 4 had experienced significant economic decline during the global financial crisis 2008, when their accounts had received unqualified audit reports less than 12 months before the crisis? Scholars, professionals and regulators have advanced three main arguments: (1) the dominance of the Big 4 limits competition and choice; (2) failure in communication between auditors and regulators; and (3) audit standards were slipping. The paper examines those arguments and empirically demonstrates for the first time a possible link between Big 4 audit reports and their audited companies market risk. The findings are from a longitudinal financial analysis of nearly 70,000 global public companies for the period 1995-2011