EY global chief admits ‘zero contingency’ for audit break up

Revealing record worldwide revenues of $36.4bn, Carmine Di Sibio has hit back at proposals in the UK for operational splits between the Big Four’s audit and consultancy practices

Reporting a 4.6% increase in fees to $36.4bn (£29.6bn), the newly installed global boss of EY says he does not accept that the quality of its audits would be improved by splitting the audit division away from its consultancy group.

Carmine Di Sibio, who took over as global chief executive of the Big Four firm’s international network in July this year, has said the group had done ‘zero’ contingency planning over how a forced break-up of its UK business could affect its work in the US, according to the Financial Times.

He added that EY believed the quality of its audits depended on it remaining a multidisciplinary firm.

Di Sibio’s remarks come just over a week before the latest round of consultation on audit market reform closes. The UK government’s consultation on the Competition and Markets Authority’s proposals on the audit market for larger listed companies in the UK is due to close on Friday 13 September.

An EY spokesperson said that as the CMA proposals were a UK phenomenon, the main impact will be in the UK. The spokesperson added that it has robust contingency plans in the UK for the potential UK changes, but this is not something that will impact its business in the US as the regulator there is not making any changes. There are already rules in the US around the kind of work it can perform for audit clients, the spokesperson said.

Audit work accounts for nearly 35% of EY’s global revenue. It remains the largest division of the network by fee income for the year ending June 2019, but at 4.4% (in local currencies) has the slowest growth rate.

Also in local currencies, EY’s global advisory business grew by 9.2% to $10.2bn over the same period, while its tax practice grew 8.6% to hit $9.5bn in fee income. Transaction services grew by 15.5% to $4.1bn.

Revenue also increased across all four of EY’s geographic areas: in local currencies, the Americas grew by 8.5% to $16.7bn; Europe, Middle East, India and Africa (EMEIA) by 7.1% to $14.1bn; Asia-Pacific by 9.1% to $4.3bn; and Japan by 7.5% to $1.2bn.

EY now employs more than 284,000 people around the world, increasing its workforce by 8.6% over the year. During the year, it appointed 1,163 new partners.

The network continues to invest in technology, setting aside $1bn over two years for areas such as artificial intelligence, blockchain and cloud-based services.

Andy Baldwin, EY global managing partner for client service, said: ‘As technological disruption reshapes economies, businesses and the future of work, the demand for the tech-driven compliance and consulting services we provide is changing.

‘We are fully focused on using leading-edge technology, delivering high-quality services, making greater use of our strong portfolio of alliances and on developing our talented EY people to be the world’s most trusted, distinctive professional services organisation.’

These latest results mean that EY remains the third largest global network by fee income behind Deloitte Touche Tohmatsu and PwC, while KPMG is the fourth largest. Deloitte and PwC are due to report their global results shortly, while KPMG is not expected to reveal its latest income figures until the end of the year.

By Philip Smith

Philip Smith |Contributing editor, Accountancy Daily

Philip Smith is contributing editor at Accountancy Daily and a freelance journalist specialising in accountancy and tax matters. He ...

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