HEY “(forward)”. Indeed, the British auditing giant has seen its management approve its spin-off plan for its consulting business and will now seek the agreement of its thousands of associated partners.
“EY executives have made the decision to go ahead with the partners’ vote to separate (the group) into two separate multi-disciplinary organisations,” a statement read. The discussion with the partners should last until the end of the year and their vote will take place between the end of 2022 and the beginning of 2023, it is specified.
EY says it has “carefully evaluated its options” and believes this split will “create more value for our employees, our customers and communities.”
Avoid potential conflicts of interest
EY planned to separate its audit activity from its consulting activity so that it could win contracts in one activity or another without worrying about potential conflicts of interest.
The Financial Times (FT) added on Tuesday that the consulting business could go public, which would represent millions of dollars in benefits for the nearly 13,000 associated partners of the international firm, whose headquarters are in London. This new business model could “change the industry,” EY CEO Carmine Di Sibio told the Wall Street Journal on Thursday.
However, one of the obstacles to the operation lies in the distribution of responsibilities between the two entities, the FT added, while EY in particular is the subject of a large number of legal proceedings.
The auditing firm is, for example, the subject of a procedure of at least 2,500 million dollars before the British justice for negligence in its controls of the accounts of the group of Emirati hospitals NMC Health. The latter went bankrupt in 2020 following the discovery of massive accounting irregularities.
A sector in the sights of the government
EY competitor KPMG has also recently been sued in a £1.3bn lawsuit for breach of its obligations in the bankruptcy of the Carillion construction group, one of the largest ever known in the UK. The audit sector in the United Kingdom is in the sights of the government, noted for not having seen the emblematic bankruptcies of recent years: in addition to Carillion, those of the BHS store chain in 2016 (PwC) and the tour operator Thomas Cook in 2019 (EY).
London had announced last year a major reform project for the sector, proposing in particular to create a new audit regulation agency and break the dominance of the “big four”, the world’s four main audit and consulting firms, to avoid conflicts of interest. The reform, however, continues to be postponed.
Source: BFM TV
