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EY plans to separate audit off into breakaway firm


The accounting landscape could soon undergo its biggest shake-up since Arthur Andersen’s demise two decades ago as the Big Four firm EY plans a worldwide split of its audit and advisory businesses. 


27th May 2022
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As reported in the Financial Times this morning, insiders from EY have leaked that the firm is looking to circumvent any conflicts-of-interest accusations from its audit and advisory services by voluntarily separating audit from the rest of the business. 

The break-up would mean EY would have two separate global professional services organisations: a separate audit-focused firm and separate advisory operations. 

While the plans still need to be hammered out and signed off, one of the insiders told the FT that tax would side with the audit-focused business to support company audits. Meanwhile the consultancy business would be able to offer advisory services to non-audit clients. 

The split would come as the Big Four firm’s reputation has been bruised following accounting scandals such as criminal probes for its audits of Wirecard in Germany and audit fines in the UK like the recent Stagecoach £2.2m sanction

Despite Wirecard tarnishing its public reputation, EY reported in September that its global revenue increased to $39.96bn for the fiscal year. Audit was flagged as the firm’s biggest service, raking in 33.95% of the total revenue – which demonstrates the strength in the operation standing on its own as a separate entity.  

Scenario planning

EY is staying tight-lipped on the news and hasn’t confirmed the split yet. A spokesperson for the firm told AccountingWEB: “As the most globally integrated professional services organisation, we regularly conduct scenario planning and review EY businesses on a global basis to determine that we have the optimal strategy, structure and footprint to focus on delivering high-quality audits and exceptional service to all clients across EY service lines. 

“We routinely evaluate strategic options that may further strengthen EY businesses over the long term. Any significant changes would only happen in consultation with regulators and after votes by EY partners.”

Audit sector reform

The Financial Reporting Council (FRC) had previously given Big Four firms until 2024 to split the operation of their practices. The regulator had drawn up plans to reform the audit sector following the collapse of Carillion and a spate of other accounting scandals.  

The global accounting giants had started rolling out their plans. For example, Deloitte had set up a new audit governance board in January 2021 to oversee the early adoption of the FRC’s principles of operational separation, while in July 2021, EY followed and announced its independent oversight board as part of its plans to split its audit and consulting arms.

However, EY’s apparent plans to completely split the business takes a massive step further than the FRC’s principles to improve the quality and independence of audit, and it puts pressure on the other Big Four firms to follow EY’s lead.


Replies (1)

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By Hugo Fair
27th May 2022 15:05

Déjà vu ... plus ça change, plus c'est la même chose ... tourner en rond ...
... don't the French have a lot of useful phrases!

Don't forget that you don't get to be a Partner by being the type of person who votes for a smaller bonus - so the one thing you can be sure of is that any change (IF it happens) won't be to the real detriment of those that have to vote it through.

And the frankly toothless FRC? No doubt they'll continue to take stage directions from their masters (EY et al).

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