Source: Colors Of India
Ernst & Young is reportedly evaluating options in order to enhance their audit quality, said CEO Carmine Di Sibio on Thursday, May 26. Di Sibio specified this is an internal memo reviewed by concerned authorities. This is at a time when Big Four accounting firms are often being accused for the lack of necessary independence.
This memo was given as a response to a report from the Financial Times. The report stated that the accounting company is under arrangements to split its worldwide audit and advisory operations. Referring to the media coverage on plans to spinoff, Sibio stated that decisions of this sort have not been made. A spokesperson from Ernst & Young stated that the firm is under the process of routinely evaluating strategic options, however the process is in its early stages.
In case a spinoff takes place, it will give rise to an audit-focused firm which would be separate from the rest of the business. However, the report stated, the exact structure of the shake up still remains under discussion.
“No such decisions have been made,” Sibio said in the memo.
EY, based in London, is one of the the Big Four accounting firms, which consists of Deloitte LLP, KPMG and PricewaterhouseCoopers. These firms audit companies, along with paying fees for advisory and consulting work. Previously, the firms have drawn criticisms from various regulators owing to conflicts of interest that undermines the abilities for the conduct of independent reviews. EY offers services such as assurance, consulting, transactions and ones related to tax. The firm earned a revenue of $40 billion, $13.6 billion of which came from the audit work.
In the United States of America, the securities regulator of the country is probing conflicts of interest at the biggest accounting firms of the nation. These details were highlighted in a report by the Wall Street Journal in March. In the memo to the partners to the firm, the Chief Executive Sibio stated that the altering market landscape is competitive and regulatory. Owing to this, the firm is working on it for the evaluation strategic alternatives.
“with the changing competitive, regulatory and market landscape, work is ongoing to evaluate strategic alternatives”.
The spokesperson from EY additionally stated that any significant changes would only take place in consultation with concerned regulators, and following the votes by partners of Ernst & Young. About two years ago, the German fintech firm Wirecard alleged that EY was involved in shoddy auditing.
