EY, one of the world’s largest audit and consulting firms, is planning to split its two main business practices.
In an announcement Thursday, the company said its top leadership had decided to “separate into two distinct multidisciplinary organisations”.If the plan is approved, EY will operate as two separate companies. One will primarily perform audit work, the other will perform consulting and advisory work.
The proposed split, which has been underway for many months and has been widely discussed internally, could result in a separation between the audit and consulting work EY performs for some corporate clients. It is intended to help you avoid any conflicts of interest.
This plan will also result in significant payments to some of our partners. But the proposed split would have to be approved by his over 10,000 EY partners working in 140 countries. EY, commonly known as Ernst & Young, employs approximately 300,000 people worldwide.
In a statement on Thursday, EY said it hopes company partners will begin voting on the proposal later this year. The company may also need to obtain regulatory approval for this plan from some of the countries in which it operates.
“We believe we can embrace a changing environment, build a business that redefines the future of our profession, create exciting new opportunities and deliver greater long-term value to EY people, clients and communities. I firmly believe
One way EY will accomplish the split is by spinning off its consulting arm into a company that can apply for an initial public offering. Audit work will likely remain a private partnership.
The proposed split comes as the Big 4 audit firms come under increasing scrutiny from US securities regulators.
In June, EY learned that hundreds of auditors had cheated on various ethics exams required to obtain or maintain a professional license, and that EY had taken sufficient steps to stop the practice. agreed to pay a $100 million fine after U.S. securities regulators discovered it was not.
Penalties paid by EY Twice as much as KPMGanother major audit firm, paid in 2019 to settle an investigation by the Securities and Exchange Commission into similar allegations of auditor misconduct in an internal training exam.
Another SEC concern is the issue of auditor independence. Regulators want to ensure that the accounting firm’s review of a company’s financial records is not undermined by other consulting, advice, or lobbying activities it may undertake on behalf of the company.
In recent years, the big four accounting firms – Deloitte, EY, KPMG and PricewaterhouseCoopers – have come under scrutiny for lobbying tax reform that has benefited corporate clients to whom they have provided both auditing and consulting services. rice field. In some cases, accounting firms hire consultants to devise tax-saving strategies for their corporate clients, while auditors are responsible for blessing their clients’ bookkeeping.
Regulators began scrutinizing the operations of accounting firms about 20 years ago. The Enron bankruptcy in 2001 put the spotlight on the role of auditor Arthur Andersen, who helped carry out an accounting fraud at energy giant Enron. Federal prosecutors later filed criminal charges against Arthur Andersen. The company no longer exists.
In the aftermath of the Enron bankruptcy and other big corporate misconduct, Congress passed legislation creating a Public Company Accounting Oversight Board. This committee is within the SEC but has its own enforcement actions against audit firms.