In Japan, the Securities Exchange Act has granted the authority to set up the Japanese accounting standards and services of the public companies to the Minister of Finance formerly or the Director General of the Financial Service Agency at present. For this reason MOF or FSA formed an advisory council which is called as Business Accounting Deliberation Council (BADC which consisted of members with academic background, professional accountants, financial statements preparers and users, and ex-government officers. Accounting services in Japan are considered as one of the best accounting services in the world.

 

Out of all the accounting firms in Japan, there are four largest international professional services networks in accountancy and professional services which have created an oligopoly in auditing large companies are namely: PricewaterhouseCoopers; KPMG; Deloitte Touche Tohmatsu and Ernst & Young. These firms handle the vast majority of audits for publicly traded companies as well as many private companies, creating The Big Four firms in Japan.

None of the above mentioned accounting firms is a single firm. They are accounting networks. Each of the Big four’s is a network of firms, owned and managed independently. They have entered into agreements with other member firms in the network to share a common name, brand and quality standards. Each network has established an entity to co-ordinate the activities of the network. In one case (KPMG), Swiss is the co-coordinating entity, and in other three cases (Deloitte Touché Tohmatsu, PricewaterhouseCoopers and Ernst & Young) a UK limited company is the co-coordinating entity. These entities are similar to law firm networks found in the legal profession.

KPMG is a global network of professional firms which provides Audit, Tax and Advisory services. KPMG in Japan was established when it opened a network office in Japan in 1949, being the first international accounting network to do so.  “Deloitte” is the brand under which independent firms throughout the world collaborate to provide audit, consulting, risk management, financial advisory and tax services to the selected clients including multi-national enterprises and major Japanese business entities.

Ernst & Young provides global services in four main areas of Assurance, Tax*, Transactions and Advisory. It is helping clients in retaining the confidence of investors, manage risk, strengthen controls and achieve potential.

PwC is providing industry-focused assurance, tax and advisory & consulting services to build public trust and enhance value for its clients and their stakeholders.

The limiting factor on the development of additional firms is an important concern, although some of the firms in the next tier have turn out to be pretty significant, and have formed international networks, effectively all very large public companies insist on having a “Big Four” audit, so the smaller firms have no way to grow into the top end of the market.