Who conducts an audit?

Companies can - and do - perform internal audits, where their own staff members double-check their books. But usually when people talk about auditing they’re referring to external audits, which are done by someone not connected to the organisation being inspected. Governments sometimes fill this role: America’s Internal Revenue Service (IRS) is a well-known example. But more commonly external audits of companies are provided by private accounting firms. 

Globally, the industry is dominated by a handful of firms known as ‘the Big Four’. They are: PricewaterhouseCoopers (PwC), Ernst & Young (EY), Deloitte, and KPMG. In 2020 the Big Four between them audited 99 percent of the S&P 500 and every single one of the the companies on the FTSE 100. (The S&P 500 are the 500 most important American companies listed on US stock exchanges, the FTSE 100 is the equivalent for British companies.) 

Part of the reason for this is the depth of knowledge and experience that is required to audit big, multinational companies, whose books get really, really complicated. Ultimately, it’s really hard for new or smaller audit firms to build the same level of expertise that the Big Four already have, especially as multinational firms are understandably reluctant to take a shot on hiring an audit firm that may not be able to handle their books.  

Depending on the size of the company being audited, auditors will work alone or in groups. When they work as a group, there’s always a head auditor who takes final responsibility for the group’s conclusions.