Consider this scenario: Acme Corp., the large, long-term client of a Big Four accounting firm, asks its accountants to perform due diligence on the books of a company, Zulu Inc., being considered for acquisition. It comes to the attention of the acquirer that for some years Zulu has employed the same accounting firm. Directors at Acme, concerned about having their accountant review the working papers prepared by other employees of the same accounting firm, suggest hiring someone else, even though accountants for both clients insist that proper barriers are maintained within their firm. A search for another Big Four accounting firm is launched by Acme. But upon closer examination, it is found that, for one reason or another, all of the other three Big Four firms have greater conflicts of interest (i.e., representing Acme's arch competitors, etc.) than the one hired to perform due diligence on its own work. The audit committee at Acme, unwilling to entrust the due diligence to a second-tier accounting firm, reluctantly elects not to recommend to management that it switch accountants.
Why has the likelihood of this situation arisen? Consolidation within the "industry" has been underway for the past decade or more. But clearly, the demise of Arthur Andersen didn't help. And at least for those who would claim that the Justice Department played a role in Andersen's demise, the irony is that the Justice Department itself may have contributed to the tightening of an accounting oligopoly that could set the stage for future accounting-related controversies.
Is the hypothetical situation described above more likely to arise periodically in the future than it did in the past? Does it suggest an opportunity for a would-be fifth or sixth entrant to the global elite of accounting firms? Will such an organization, probably already in existence, be able to take advantage of the opportunity? Or will the natural tendency of risk-averse corporate audit committees to engage the biggest accounting firms insure that the oligopoly will become even stronger? Will it require the relaxation of guidelines regarding potential conflicts of interest among accountants? Or will the final answer lie in some other action designed to restore choice among accounting clients facing the prospect of utilizing the services of firms continually "meeting themselves" in one situation after another? What do you think?