British auditing giant EY has had its plan to spin off its consultancy business approved by its management and will now seek the green light from its thousands of associated partners.
“EY executives have made the decision to move forward with the partner vote to separate (the group) into two separate, multi-disciplinary organizations,” said a statement received by AFP on Friday.
The discussion with the partners should last until the end of the year and their vote will be held between the end of 2022 and the beginning of 2023, it is specified.
EY says it has “evaluated its options carefully” and believes that this split will “generate more value for our employees, our customers and communities”.
‘The world is changing and we must adapt to reach our full potential’, justifies the company.
EY planned to separate its audit activity from that of consultancy in order to be able to win contracts in one activity or the other without worrying regarding possible conflicts of interest.
The FT added on Tuesday that the consulting business might notably go public, which would represent millions of dollars in profits for the some 13,000 associated partners of the international firm, whose head office is in London.
This new business model might ‘change the industry’ assured Thursday in the Wall Street Journal the CEO of EY Carmine Di Sibio.
One of the obstacles to the operation, however, lies in the distribution of liabilities between the two entities, added the FT, while EY is in particular targeted by a large number of legal proceedings.
The audit firm is for example the subject of a procedure to at least 2.5 billion 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.
KPMG, a competitor of EY, has also recently been sued in proceedings worth 1.3 billion pounds for breaches of its obligations in the bankruptcy of the construction group Carillion, one of the largest ever known in the United Kingdom.
The audit sector in the United Kingdom is in the crosshairs of the government, pointed out for not having seen coming the emblematic bankruptcies in recent years: in addition to Carillion, those of the chain of stores BHS in 2016 (PwC) and of the tour operator Thomas Cook in 2019 (EY).
London had announced last year a project of vast reform of the sector, proposing in particular to create a new regulatory agency for audit and to break the domination of the ‘big four’, the four main global consulting and audit firms, to avoid conflicts of interest. The reform, however, continues to be postponed.
/ATS