The Big 4 auditing companies are publicly traded, so I assume THEY need to be audited.
How does that work? Is it a hostile process ringed with lawyers as each firm is forced to allow one of its competitors to examine its books? Do they borrow one of the men-in-black flash pens to erase the brains of the enemy auditors?
Or is it a cordial process, because they (should) know just what is needed and it is a routine part of business and no big deal?
Just curious… seems like a funny situation to have your competition swoop in and poke around.
I’m afraid you’re incorrect that the Big Four (previously the Big Five, Big Six and Big Eight) accounting firms are publicly traded. They originally were partnerships and are now limited liability partnerships (at least in the US). The partners in the firms hold all of the ownership interests.
The financial results of the partnerships are only distributed to the partners, not publicly released. I don’t know if their results are audited, but if so it would not be surprising that another of the big firms audited them. The relationships between the firm are very cordial, and in a lot of ways they each depend on each other.
Public accounting being a “profession” like law or medicine, I suspect that there’d be professional responsibility (i.e., professional ethics) concerns involved in any sort of ownership scheme (like public trading of shares) of a public accounting practice which would allow non-accountants to have an ownership interest in the practice. Is there a Doper CPA who can answer that question with authority?
Back when I took an introduction to accounting in college (which was back when they were “The Big Eight”, to give you an idea about how long ago that was) the question came up in one class period. IIRC, the professor’s answer was that they have to be audited by other accounting firms, not necessarily other Big Eight (Six/Five/Four) firms (ISTR there was a highly regarded accounting firm, which was just below the Big Eight/Six/Five/Four tier, which specialized in auditing accounting firms). Of course, because public accounting firms aren’t publicly traded companies they’re not under the same auditing requirements that publicly traded companies are.
It depends on the state. In Washington, CPAs must own at least 51% of a firm, and non-CPA owners have to register as such (for $330), pass an ethics exam (for about $150) and complete 4 CPE of ethics each year. Registrants can be rejected for reasons such as a criminal background. While this does not prohibit public trading outright, it’s not like picking up a few extra shares of Microsoft.
It’s also worth pointing out that all states require some kind of peer review every few years. It’s an audit of work rather than financials, but it still means that CPAs have to get used to other CPAs poking around in their records.