Second-Tier Accounting Firms Poised to Move Up
The report explores the possibility of the Second Six, that is the six largest Group B firms, expanding into Big Four territory. Arthur Andersen’s demise opened the door slightly for the Second Six, which successfully grabbed some of the smaller firms that had been on Andersen’s roster.
Group B firms have also benefited from the Sarbanes-Oxley Act of 2002, which limits the nonauditing work that auditors can do for their clients. As a result, many large companies are hiring Second Six firms to do consulting work that the Big Four firms are prohibited from doing.
The report also points out potential problems for the Second Six, including higher liability insurance premiums. According to the article, Group B firms stand to lose existing audit clients because the high cost of increased regulation is causing some smaller public firms to go private.