The plan came as regulators called for major industry reforms over conflict of interest and poor working practices…reports Asian Lite News
Accounting firm EY has called off its plan called ‘Project Everest’ to break up its auditing and consulting units, BBC reported.
The firm, formally known as Ernst & Young, announced they were “stopping work on the project” because it’s US arm decided to not to move forward, BBC reported.
The Big Four — Deloitte, EY, KPMG and PwC — dominate the global accounting market share.
The plan came as regulators called for major industry reforms over conflict of interest and poor working practices, BBC reported.
Had the deal gone through, it would have been the biggest shake up in the accounting industry for more than two decades.
Officials initially flagged concerns that the audit arm of the company could not do a fair job for its client who also used its consultancy services. EY’s announcement ends a yearlong battle to build internal support to split the units.
“We acknowledge the challenges with separating some of our businesses that have the deepest technical expertise in a way that gives both organisations the capabilities they need to compete in the market effectively,” according to an internal note seen by the BBC. “We also recognise that we need more time to make the necessary investments to prepare the businesses for a separation.”
The project cost the Big Four more than $100m (�80.3m) according to the Wall Street Journal.
Earlier this month, Germany’s accounting watchdog fined and banned EY for its handling of Wirecard’s audits, the insolvent electronic payment processor. It owes creditors almost $4bn, after admitting a �1.9 never existed on its books as part of a global fraud operation. The ban forbids EY from conducting audits on certain companies for two years, BBC reported.
In 2021, the UK regulators called to reduce the dominance of the Big Four after high-profile accounting failures such as Carillion and British Home Stores (BHS). PwC, the US retail chain’s former auditor, was fined a record $8m after signing off accounts the industry watchdog, the Financial Reporting Council (FRC), called “incomplete, inaccurate and misleading” in its report into the aftermath of the collapse, BBC reported.
In the US last year, the Securities and Exchange Commission (SEC) charged EY $100m, the largest penalty ever against an audit firm for its employees cheating on their CPA ethics exams and misleading their investigation.