EY draws up proposals to spin audit business off from consulting

EY IS working on plans to split its global audit and consulting operations in the biggest shake-up of a “big four” accounting firm in decades.

Senior partners at the firm are drawing up plans to restructure the business amid severe pressure from regulators worldwide over concerns around conflicts of interest.

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.

The proposal could see EY spin-off its audit division into a separate entity from the rest of the business, resulting in two separately owned businesses.

A voluntary break-up would represent a significant shift for EY, whose former global chief Mark Weinberger hit out at calls to break up the big four in 2018, citing a lack of competition in the market. The potential split was first reported by the Financial Times.

In the UK, the big four have already been forced to start ringfencing their audit and consulting arms in an attempt to reduce conflicts of interest following major corporate collapses at the likes of 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.

However, broader reforms that are intended to break the dominance of the big four by giving smaller players a greater role in the audit market have been put on hold after the Government did not include them in this month’s Queen’s Speech.

The big four are also facing regulatory pressure in the US. In March, the Securities and Exchange Commission launched an investigation into conflicts of interest at the major audit firms that could undermine their ability to conduct independent reviews of company accounts.

A spokesman for EY said yesterday: “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. We are in the early stages of this evaluation, and no decisions have been made.”