EY Confirm split of Audit and Consulting services.

Posted by | September 9, 2022 | Audit Career Trends, Big 4 Accounting firms, IT Audit, Latest Audit Information & News

Audit International have been following this news closely for the past few months and we are all interested to see what will unfold for the Big4 giant over the next few months and perhaps years. Just this week, the EY bosses have approved the radical split in largest shake-up of Big Four accountants in decades, with the Big4 Auditor planning to create ‘two distinct, multidisciplinary organizations’ amid regulatory pressure.

Bosses at EY have agreed to push ahead with a split of its audit and consulting arms in the biggest shake-up of a Big Four accounting giant in decades.

The firm said on Thursday that it will ballot its partners on a plan to separate the 312,000-strong business into “two distinct, multidisciplinary organizations” following a strategic review.

EY’s partners will vote on the proposal in the coming months, with the process set to conclude in early 2023, the firm said.

The voting rules will vary by country, but in the UK, the firm will require 75pc of its partners to back the plan if it is to be ratified.

Hywel Ball, EY’s UK chairman, said: “The needs of our clients, people and stakeholders are changing and I’m proud that we are reviewing the shape of our business in the UK and globally so that EY is well positioned to build on its success into the future.

“We believe the creation of two strong, independent businesses would help us to better meet the needs of our clients; create compelling careers for our people; and serve the public interest by providing greater choice in the market and a global response to regulatory concerns.”

The plan could see EY publicly list its advisory division or sell a partial stake in the 312,000-strong firm in a move that would result in bumper payouts for partners, similar to Goldman Sachs’ flotation in 1999 and Accenture’s in 2001.

However, Mr. Ball said no decisions have been made about how the split might occur.

EY is proposing the split amid severe pressure from regulators worldwide over concerns around conflicts of interest at the Big Four firms.

EY, Deloitte, KPMG and PwC have been heavily rebuked by regulators in the UK and US over a perceived lack of independence in their auditing divisions because of the fees they also earn from advisory work.

In the UK, the Big Four have already been forced to start ringfencing their audit and consulting arms in a bid to reduce conflicts of interest following major corporate collapses such as Carillion and BHS.

The Financial Reporting Council has given the firms a deadline of 2024 to operationally split their audit arms from the rest of their advisory businesses.

A decision on the split at EY has been held up for months due to disagreements over how billions of dollars of liabilities should be split and regulatory issues in certain countries, including China.

Earlier this week, it was revealed that senior staff at EY were seeking to defect to rival firms in a sign of growing internal strife over its proposed break-up.

KPMG and PwC are among firms that have seen a significant increase in the number of applications from senior managers, directors and even new partners at EY in recent months.

In July, EY held a briefing on the proposed split for its UK partners at the five-star Royal Lancaster hotel near Hyde Park in west London.

Mr. Ball said views expressed in that meeting showed that partners were “proud” that EY was the first Big Four firm to try and split, adding: “We’ll redefine the profession in the coming years.”

Deloitte, KPMG and PwC have said they have no plans to engineer a similar split of their advisory and audit arms.

Separately, Deloitte posted record revenues on the back of a boom in tech consulting last year.

The firm reported revenues of $59.3bn (£51.5bn), a jump of nearly 20pc on the previous year.

Whatever happens with the split, Audit International will be following this story very closely and bringing you the latest updates on it.

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