EY China branch rebels against plans to split audit and consulting

THE Chinese branch of EY has rebelled against a push to separate the “big four” accountancy firm’s auditing and consulting divisions in a significant blow to its plans for a break-up.

EY Greater China, which covers the mainland, Hong Kong, Macau, Mongolia and Taiwan, said yesterday that its current structure will remain in place because this allows clients to access “a wide range of services”.

The announcement was a repudiation of a decision made just a day earlier by EY’S global leaders.

That deal, which must still be ratified by a vote of 13,000 partners, excludes the Chinese arm of the group.

Carmine Di Sibio, EY global chairman, admitted that more work is needed to satisfy bosses there.

The auditing firm has so far failed to come up with a structure that satisfies China’s regulators, according to the Financial Times. However, EY Greater China also claimed it was resisting because of the “business environment and development stage in the region”.

The branch added: “In view of the differences in the market and regulatory environment of the member institutions in the EY network, each member institution can independently decide whether to participate in the spin-off plan according to its own governance rules.”

EY is a global network made up of practices in some 150 countries, with the Chinese arm employing roughly 22,000 staff. But each practice has a degree of autonomy and the Chinese division has chosen to opt out of plans to split the auditing and consultancy businesses.

It was the only country to do so out of the biggest 15 by revenue.

Bosses at EY globally have bet that by splitting the two divisions, they can achieve faster growth because they will no longer have to worry about possible conflicts of interest between the two.

They plan to then float the consultancy business on the stock market late next year, selling a 15pc stake to investors.

But in China, the auditing and consulting businesses will stay together and remain part of the EY network.

It means that consulting colleagues in other countries may eventually end up competing with their Chinese contemporaries for business.