At EY France, everything was already in preparation for several months. The teams established themselves and even selected potential candidates among local lawyers and consultants, not without an attractive financial offer. But the mountain was too high to cross, and the Everest project, which is to separate auditing from consulting, had gradually fallen behind schedule.
The complexity of the EY network structure
EY is, in each country where it is present, a different entity, with its rules, its capital and its associates. Therefore, to be implemented, the project required almost as many votes as representations it has in 150 countries.
While some countries, notably France, were interested parties in the division project, others, such as China, had made it known that they had no interest in decoupling these activities.
But ultimately it was the defection of the US branch, which accounts for more than 40% of global turnover, that brought the project to a halt, according to the press release issued by EY.
Another topic of tension has arisen in the matter of sharing the tax activity. Although it is mostly about advice, some audit assignments also require the intervention of tax lawyers, for which reason the new audit entity asked that part of the “practice” accompany them, without the protagonists failing to reach an agreement.
The multidisciplinary model remains the dominant model
The reason given by EY to justify the spin-off has never really been understood by professionals in the sector. The big competitors – Deloitte, PwC, KPMG – have also rushed to defend the multidisciplinary model, bringing together consultants, lawyers, auditors or chartered accountants. At the request of your customers who have a “one stop shop” in front of them, but also of employees who like the cross functionality offered by the Big Four. “A firm that only offered auditing would lose quality, because it would lose its talents,” explains an expert.
EY wanted to give more freedom to its consulting activity and free it from potential conflicts of interest between audited companies and consulting clients. In reality, the operating rules differ in each country. In France, when a company is audited, the advisory missions that can be offered to you are limited. “Conflicts of interest exist but they are well known and are handled on a case-by-case basis, says a manager. And the growth potential in consulting is so great that there is still a lot to do there.”
A project, especially financial, that goes bad
The project consisted of the sale of the audit activity to a consortium while the consultancy had to continue under the EY brand and be listed on the stock market. An above all financial operation, for the partners, to sell their part. “The valuation they were told did not live up to their expectations” in a difficult year.
Rising rates, persistent inflation and the recent banking crisis contribute to lukewarm investors and IPOs are few. It is the end of the Everest project, but the division is not completely buried. An EY spokeswoman confirmed on Wednesday that, in the long term, separating audit and consulting remained part of the roadmap… until a more opportune moment was found.
Source: BFM TV
