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EY is set to go forward with a split of its audit and consulting units in what has been deemed as the “biggest shake-up of a Big Four accounting giant in decades”.
While EY bosses have approved the plan, the firm will ballot its partners on the move to separate the business into “two distinct, multidisciplinary organisations”. Partners will vote on the proposal in the coming months, and the process is set to conclude in early 2023.
In the UK, the firm will require 75% of its partners to vote in favour of the plan if it is to be ratified.
The move could reportedly see EY publicly list its advisory division or sell a partial stake in the firm.
In a statement seen by Accountancy Today, Hywel Ball, EY’s UK chairman, said: “The needs of our clients, people and stakeholders are changing and I’m proud that we are reviewing the shape of our business in the UK and globally so that EY is well positioned to build on its success into the future.
“We believe the creation of two strong, independent businesses would help us to better meet the needs of our clients; create compelling careers for our people; and serve the public interest by providing greater choice in the market and a global response to regulatory concerns.”
He added: “We will be working closely with all our stakeholders in the months ahead as we engage in more detail and move towards a partner vote. We are in a very strong period of growth for our business and remain focussed on delivering value and quality for our clients and building a successful legacy for future generations.”
The split proposal comes amid rising pressure from regulators over concerns regarding conflicts of interest at the Big Four firms, which have been reprimanded over a supposed lack of independence in their auditing divisions.
In the UK, the Big Four have already been forced to reexamine their audit and consulting arms in a bid to reduce conflicts of interest following major corporate collapses at businesses like Carillion.
The Financial Reporting Council (FRC) previously fined KPMG £14.4m after it provided “false and misleading” information and documents to the regulator in connection with its Audit Quality Reviews of two Carillion audits.
The regulator has now given the firms a deadline of 2024 to split their audit arms from the rest of their advisory businesses.
The move intends to ensure that the audit practices are focused on high-quality audits in the public interest, rather than relying on persistent cross subsidy from the rest of the firm.
