Smaller Japanese Audit Firms Under Pressure to Merge to Survive

Mergers among Japanese auditing firms are expected to multiply, especially among small and medium-sized firms seeking to maintain market share in an industry dominated by the Big Four auditors.

Local units of the Big Four—KPMG, Deloitte, Ernst & Young, and PricewaterhouseCoopers—review financial reports for the majority of listed Japanese companies. There are five second-tier auditing firms and 124 small and mid-sized sized auditing firms registered with the Japanese Institute of Certified Public Accountants, the industry’s self-regulating body.

Two Japan-based units of PwC’s global network have agreed to merge in December, the firms announced Oct. 16. The announcement follows a report ...