Following a Financial Times report that claims EY has plans to split its audit and advisory operations globally, EY says it is in the early stages of evaluation.
“As the most globally integrated professional services organization, 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," says EY in response.
"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."
The Financial Times report comes in the wake of conflicts of interest in the industry in general, and in the aftermath of regulatory action by regulators in the UK and US.
EY, Deloitte, KPMG and PwC - the so-called Big Four - have had issues around conflict of interest in their auditing and consulting, tax and advisory work, the report claims. Consulting is believed to generate more fees than auditing. At some point, all four have been criticised over their perceived lack of independence, accordinng to the Financial Times.
As an example, EY was Wirecard’s auditor. Yet, the firm is allegedly believed not to have unearthed alleged fraudulent bank statements. Allegedly, it was a whistleblower that caused an eventual review of Wirecard’s operations. Subsequently, KPMG was appointed as special auditor, and this special audit revealed that EY failed to verify the existence of cash reserves in bank statements.
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According to the Financial Times, the audit firms rebuilt their consulting arms after initially selling them off after the collapse of US energy company Enron in 2001, which led to the demise of auditor Arthur Andersen.
EY, which employs 312,000 people in more than 150 countries, is structured as a network of legally separate national member firms that pay a fee each year for shared branding, systems and technology.
