Restructuring fails: EY does not want to split up after all

Restructuring fails
EY doesn’t want to split up after all

For years, supervisory authorities have warned of conflicts of interest when auditors also advise the companies they audit. At Ernst & Young there have therefore been efforts for a long time to split up the group. But now they are suddenly off the table.

Auditing and consulting business firm Ernst & Young has halted its own split-up plan. The US partners objected to the proposal, the Wall Street Journal and the Financial Times reported. With the announced split, EY wanted to meet the demands of many supervisory authorities, who increasingly fear conflicts of interest if auditors also advise the companies they audit.

The rejection ends more than a year of efforts to split the auditing firm into a consulting and an auditing division. Efforts had picked up steam by spring this year, when US partners are now blocking the plan. The Big Four company announced the decision in a statement to the partners, which was available to the “Financial Times”.

The plan, codenamed “Project Everest,” was approved by EY’s global leadership in September and would have marked the biggest restructuring in the accounting industry in more than two decades. The statement, signed by EY’s 18-strong executive, said EY was determined to seek a different solution going forward.

Revenue of $45.4 billion

“Global management remains committed to creating two world-class organizations that will continue to enhance audit quality, independence and client choice,” the letter reads. “However, we have been informed that the US Executive Committee has decided not to proceed with Project Everest. Given the strategic importance of the US member company to Project Everest, we are halting work on the project.” EY operates as a global network of member firms, but the plan had to be approved on a country-by-country basis.

With its 365,000 employees and a turnover of 45.4 billion dollars, EY belongs to the “Big Four” of the auditing companies, along with KPMG, Deloitte and PwC, which share the auditing of large, international companies almost completely.

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