Have you ever wondered about the pros and cons of a boutique auditing firm versus a Big 4? Can the experience really be that different? Let’s dive into boutique auditing firms versus Big 4!
Who Are The Big 4
The “Big Four” is a slick nickname referring to the four largest accounting firms in the United States. At first glance, the four big firms sound super similar. They’re global, have a considerable staff, offer countless services, and touch almost every industry imaginable. They’ve also stood the test of time. But if you look a little deeper, each of the Big Four is unique.
Deloitte provides audit and assurance, tax and legal, consulting, financial advisory, and risk advisory services to almost 90% of the Fortune Global 500, plus thousands of private companies. Headquartered in London, England, they boast more than 345,000 specialists across more than 150 countries and territories. Deloitte reported global revenue of US$50.2 billion for the 2021 fiscal year. If you’re a history buff, there’s no denying that Deloitte has one worth reading into. According to their website, Deloitte has served clients through three industrial revolutions as they’ve existed for more than 175 years!
Ernst & Young, better knowns as EY, also provides audit, tax, business risk, technology and security risk services, and human capital services worldwide. Like Deloitte, they’re headquartered in London. Still, they’re smaller than Deloitte, employing over 200,000 people and operating in over 150 countries with over 700 offices. EY is also slightly younger, dating back to the early twentieth century. Unfortunately, they don’t have much about their history on their website but Forbes has an excellent overview. Scotsman Arthur Young and American Alwin Ernst founded their separate companies in 1906 and 1903 and their companies merged in 1989. The OG founders would be astonished to know that EY reported global revenues of $40 billion in 2021!
While the head office is located in Luxembourg, KPMG firms operate in 145 countries and territories across the globe, offering audit, tax and advisory services. FY21 employed more than 236,000 people and reported global revenues of $32.13 billion. The KPMG website states that when the industrial revolution of the late eighteenth and nineteenth centuries transformed accounting into a profession, KPMG’s founders were center stage and pioneered the industry. The men behind KPMG initials (Klynveld, Peat, Marwick, Goerdeler) came together from 1891 to 1953.
PricewaterhouseCoopers (PwC) is headquartered in London, boasting countless offices across 156 countries and employing more than 295,000 people. In FY21, PwC firms provided services to 84% of the Global Fortune 500 companies and grossed $45 billion in 2021. They specialize in assurance and tax and advisory services. Still, they are considered a household name thanks to their participation in the Oscars. In 1935 actress Bette Davis was passed over for a nomination and rumors ran wild, causing quite the scandal. So, the Academy Awards sought an accounting firm to tabulate votes. As a result, three PwC partners know the winners’ names before anyone else on award night but mistakes still happen. Remember the 2017 Warren Beatty kerfuffle when he announced the wrong winner?
What’s a Boutique Audit Firm?
Essentially, a boutique audit firm is any company not included in the Big 4 clique. These firms range from mid-tier to tiny, offering extremely complex services (just like the Big 4) and advisory, value-add or business partnering work. But, as you’ll learn below, bigger is not always better.
Benefits and Issues Engaging the Big 4 Auditing Firms
Each Big 4 has a rich history, remains commercially successful, and serves companies with equally impressive revenue and reputations. Moreover, their global reach is unmatched, with offices basically everywhere. But does that mean that they are the right audit firm for you?
The Pros of a Big 4 Audit Firm
One of the biggest perks of partnering with a Big 4 is working with their brand. They have some serious clout! Let’s face it—when an organization shares a SOC 2 report with a Big 4 logo, it’s impressive and instantly trusted.
Bigger is not always better but that’s not to say that it doesn’t come with some perks. As mammoth organizations, a Big 4 invariably has someone to take on a project in a timely manner. They can offer clients a broader pool of resources with potentially more diverse capabilities. And because they’ve adapted through hundreds of years of economic turmoil, wars, revolutions and continuously evolved to stay relevant, clients tend to benefit from a more stringent QA process. They have defined methodologies with all the kinks worked out of the process.
The Cons of a Big 4 Audit Firm
Big 4 equals a big price tag! Because of their QA, methodology and headcount, there are a lot of steps to pay for. And, like any other purchase, you’re buying a brand that tends to cost more. Compliance and audits are tailored to your unique needs. Hence, an estimated cost for services is hard to whip up, but check out our SOC 2 cost blog for a generic view of potential audit costs.
Remember how these larger audit firms have humongous headcount so they can always take on a project? Unfortunately, it’s not always a blessing. These individuals have multiple projects on the go and they need to be thorough. They’ll spend hours on walkthroughs just to understand your processes and you may find yourself repeating yourself regularly. Especially since high turnover is typical in these roles. Building a long-term relationship with an auditor makes life easier but promotions, restructuring, employee turnover and heavy workloads can make that difficult.
Benefits and Issues Engaging a Boutique or Mid-Tier Auditing Firm
When you’re looking to get a SOC 2 or an ISO 27001, the size of an auditing firm shouldn’t be your only deciding factor. Employees at a boutique and mid-tier auditing firm have the same education, experience and know-how as the auditors at a Big 4. In some ways, they may even have more specialized expertise and knowledge due to how they can engage with their clients.
The Pros of a Boutique or Mid-Tier Firm
As smaller organizations, boutique audit firms are less expensive than Big 4 audit firms. As a result, they carry less overhead and offer their clients a bigger bang for their buck in many ways.
One of the most fantastic things about a boutique or mid-tier audit firm is the ability to build long-term, meaningful relationships. SOC 2 and ISO 27001, and many other frameworks, require audits regularly to remain compliant. Connecting with the same auditor every time streamlines the process as they have a deeper understanding of your business and your goals. This allows auditors to advise complementary frameworks to strengthen your security posture and give a fuller picture in their reports. You’re also more likely to work closely with senior staff and have them accessible to you.
Boutique audit firms also have a faster methodology for audits. Take SOC 2, for example. Boutiques and Big 4’s have to check all the requirements set out by the AICPA. Still, as you’re one of a few cases on an auditors docket versus one of many, boutique employees can focus on you—Big 4’s often pass off cases at various steps as part of their process.
The Cons of a Boutique or Mid-Tier Firm
The cons of a boutique or mid-tier firm are pretty self-explanatory. You don’t get the star-studded brand name. As smaller companies, they may have limited resources or a narrower area of expertise. In addition, as your company develops, you may outgrow its service and have to start back at square one.
Small Firm, Big Firm, Tough Decisions
Whether you pursue a relationship with a boutique firm or align yourself with a Big 4, there are compliance costs, so don’t let that be your only decision driver.
Here are four things you can do to help you choose an auditor:
- Regardless of firm size, evaluate your auditors based on reputation, experience, personality and communication, price, team availability and escalation SLA, and approach.
- Talk to at least three firms to get a good idea of who best fits your needs.
- Use the questions our Labs team suggested here.
- Talk to an expert from Tugboat Logic.
Our Labs team is made up of ex-Big 4 and boutique auditors and they’re happy to answer any questions you may have.