The original Big 8 accounting firms were Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, and Touche Ross. From roughly the 1960s until 1989, these eight partnerships audited nearly every major publicly traded company in the world, and by the late 1980s they controlled about 98 percent of all public company sales.1U.S. Government Accountability Office. Public Accounting Firms: Mandated Study on Consolidation and Competition Three waves of mergers and one criminal indictment eventually compressed those eight names into the Big 4 that still dominate the profession: Deloitte, EY, KPMG, and PwC.
What the Big 8 Actually Were
The Big 8 was not a formal association. It was shorthand for the top tier of the audit profession, the way “Big Tech” is shorthand today. Each of the eight was an independent partnership large enough to serve multinational clients, with offices in every major financial center and tens of thousands of professionals on staff. If you were a Fortune 500 company in the 1970s or 1980s, your auditor was almost certainly one of them.1U.S. Government Accountability Office. Public Accounting Firms: Mandated Study on Consolidation and Competition
One structural point matters for understanding what came later. None of these firms operated as a single global corporation. Accounting regulations in most countries require local ownership and independence, so each “firm” was really a network of legally separate national partnerships sharing a brand name, quality standards, and coordination infrastructure. They could not bind one another legally.2PwC. How We Are Structured: Corporate Governance That structure still defines the Big 4.
The 1987 KPMG Rebrand
Before the count started shrinking, one of the eight changed its name. In 1987, Peat Marwick Mitchell merged with Klynveld Main Goerdeler (KMG), a European accounting federation, to form KPMG. The acronym drew from the founders’ initials of both predecessor organizations.3KPMG International. Our History
It was the largest merger in accounting history at the time, but it did not reduce the Big 8 count. KMG was not itself one of the eight. It was a consortium of mid-sized European firms that individually lacked the global footprint of the Big 8. Peat Marwick’s name disappeared from the roster and KPMG took its place, but the total stayed at eight.
1989: Eight Become Six
By the late 1980s, corporate merger mania had shrunk the pool of large audit clients, and the ones that remained were sprawling multinationals demanding coordinated service across dozens of countries. Firms needed bigger networks, deeper technology, and more specialists in more places.1U.S. Government Accountability Office. Public Accounting Firms: Mandated Study on Consolidation and Competition Two deals closed within months of each other in 1989.
In June, Ernst & Whinney (ranked fourth) combined with Arthur Young (ranked sixth) to form Ernst & Young. In August, Deloitte Haskins & Sells (seventh) merged with Touche Ross (eighth) to create Deloitte & Touche.1U.S. Government Accountability Office. Public Accounting Firms: Mandated Study on Consolidation and Competition Four names vanished from the roster and two new ones took their place.
The resulting Big 6 were Arthur Andersen, Coopers & Lybrand, Deloitte & Touche, Ernst & Young, KPMG, and Price Waterhouse.1U.S. Government Accountability Office. Public Accounting Firms: Mandated Study on Consolidation and Competition
1998: Six Become Five
The consolidation pressure did not ease. In 1997, KPMG and Ernst & Young announced plans to merge, which would have created the world’s largest professional services firm. European antitrust regulators launched a probe, and the deal collapsed in early 1998 under regulatory resistance. An Ernst & Young partner reportedly described the process as “a complete nightmare.”
The merger that did close came on July 1, 1998, when Price Waterhouse and Coopers & Lybrand combined to form PricewaterhouseCoopers. The new firm reported more than $15 billion in annual revenue and 140,000 employees worldwide. The brand was shortened to PwC in 2010, though the legal name remains PricewaterhouseCoopers.4PwC. History and Milestones
Now there were five: Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers. European regulators had already signaled worry that dropping below five would leave multinationals with too few auditors to choose from. That concern turned out to be prescient.
2002: Arthur Andersen Collapses
The final reduction was not a strategic merger. Arthur Andersen, founded in Chicago in 1913 and once considered the gold standard of the profession, imploded in 2002 after audit failures that collectively cost investors close to $300 billion.
The most damaging engagement was Enron, the Houston energy company whose bankruptcy in late 2001 revealed massive accounting fraud. Andersen had audited Enron and was accused of destroying documents related to the work. The Justice Department opened a criminal investigation in January 2002, and the indictment alone triggered a mass exodus of clients and staff. No public company could afford to keep an indicted auditor.
On June 15, 2002, a jury convicted Andersen of obstruction of justice. Andersen then informed the SEC that it would cease auditing public companies by August 31, 2002.5U.S. Securities and Exchange Commission. SEC Statement Regarding Andersen Case Conviction The firm surrendered its CPA licenses and shut down after 89 years. Its partners, staff, and client relationships were absorbed piecemeal by the four surviving firms.
On May 31, 2005, the U.S. Supreme Court unanimously overturned the conviction, ruling that the jury instructions had been too vague and had failed to require proof that Andersen’s employees knew their document destruction was wrong. By then only about 200 Andersen employees remained, doing nothing but managing the firm’s remaining lawsuits.
How the Big 4 Trace Back to the Big 8
Each of the four surviving firms carries DNA from multiple members of the original eight:
- Deloitte descends from Deloitte Haskins & Sells and Touche Ross.
- Ernst & Young (EY) traces back to Ernst & Whinney and Arthur Young.
- PricewaterhouseCoopers (PwC) is the product of Price Waterhouse and Coopers & Lybrand.
- KPMG grew from Peat Marwick Mitchell’s merger with KMG.
All four also absorbed pieces of Arthur Andersen’s practice when it dissolved. The original Big 8 accounting firms did not really disappear. They compressed into four, and their lineage still runs through every public company audit conducted today.