This article highlights and explains the required reports on the accounting firms and the credit rating agencies. The first study is meant to identify the reasons and factors leading to "the consolidation of public accounting firms since 1989."

For most of the 20th century, the eight largest accounting firms were known as the "Big 8" and commanded a vast majority of the market share for the auditing business. Many of the Big 8 originated as partnerships between accounting firms in the United States and United Kingdom— with a global focus, these firms dominated the auditing market. In 1989, the Big 8 consisted of Price Waterhouse, Pear Marwick Mitchell, Deloitte Haskins & Sells, Touche Ross, Arthur Young & Company, Ernst & Whinney, Arthur Anderson, and Coopers & Lybrand, listed in no particular order of size or market share.

The Big 8 grew in size largely through their acquisitions of smaller accounting firms. In 1989, the Big 8 was reduced by two to become the Big 6 due to two acquisitions— Deloitte Haskins & Sells merged with Touche Ross to become Deloitte & Touche and Arthur Young & Company merged with Ernst & Whinney to become Ernst & Young. The Big 6 continued for nine years until 1998 when Coopers & Lybrand merged with Price Waterhouse, resulting in PricewaterhouseCoopers and the subsequent "Big 5." After the Enron scandal of 2002, Arthur Anderson ceased to exist as an accounting firm and the group continued as the Big 4, which it remains today.

Through the investigation of the consolidation of accounting firms, the seventh title of the Sarbanes-Oxley Act seeks to discover if businesses suffered as a result of this "limited competition," and specifically identify four possible problems: higher costs, lower quality of services, impairment of auditor independence, and lack of choice.

It also questions whether existing regulations "impede competition among public accounting firms." This title clearly seeks to uncover the reasons for the auditor consolidation in order to promote a more competitive marketplace where higher quality services can be delivered for a lower cost.

The seventh title also mandates an investigation of the credit rating agencies, such as Moody's and Standard & Poor's, essentially evaluating the role of credit rating agencies and their relationships with issuers of the securities they rate and the subsequent effect of the rating of the security on investors and the market. Not unlike the accounting industry, the credit rating agencies have enjoyed a relatively stable position without much formidable competition. The report mandated by the seventh title seeks to identify and work to remove the barriers to entry of the credit rating industry and to examine the possible conflicts of interest the various agencies may face.

The first half of the seventh title seeks to resolve the problems of the accounting industry and the interactions of the credit rating agencies with the markets and any possible conflicts of interest.

The Sarbanes-Oxley Series -- Learn More About Sarbox

The Sarbanes-Oxley Act: An Introduction
The Sarbanes-Oxley Act: Title I
The Sarbanes-Oxley Act: Title II
The Sarbanes-Oxley Act: Title III—Audit Committees
The Sarbanes-Oxley Act: Title III—Blackout Periods
The Sarbanes-Oxley Act: Title IV
The Sarbanes-Oxley Act: Title V
The Sarbanes-Oxley Act: Title VI
The Sarbanes-Oxley Act: Title VII—Accounting Firms
The Sarbanes-Oxley Act: Title VII— Past Violators
The Sarbanes-Oxley Act: Title VIII
The Sarbanes-Oxley Act: Title IX-XI