EY: plans for a historic split divide bean-counters
Calls to separate the audit and consulting functions of the Big Four accounting firms have been rumbling on for years – because of a rolling spate of corporate audit scandals, and “years of criticism over perceived conflicts of interest”, said Michael O’Dwyer in the Financial Times. Now one of their number, EY (formerly Ernst & Young) has taken the plunge with a plan that, if enacted, would “reshape the oligopoly” that has dominated professional services for two decades. The firm’s global chief, Carmine Di
Sibio, is exploring a public listing or partial sale of EY’s international advisory business, which would free it up to win work from currently “off-limits” multinationals audited by the firm.
The history of consulting rival Accenture illustrates the potential gains. It was shorn of its auditor Arthur Andersen in 2000, around the time of the Enron scandal; last year, it reported revenues of $51bn – almost double the $26bn generated by EY. Still, there are big questions about the feasibility of the plan, dubbed “Project Everest”, and whether EY’s three big peers – Deloitte, PwC and KPMG – will follow suit, said The Wall Street Journal. For the time being, the trio are digging in their heels. All three have issued statements “defending their existing models”.
A big consideration for EY is the reaction of its 312,000-strong workforce, said The Economic Times of India. While partners stand to reap large personal windfalls from a break-up and sale, uncertainty is spawning “anxiety” further down the ranks. It’s the same story Down Under, where EY has been trying “to calm staff” by reiterating that “no decision has been made”, said Edmund Tadros in the Australian Financial Review. With the cat now well and truly out of the bag, it’s hardly the most reassuring of messages.