Changes are coming in the sector of large consultants. At least in one of them HEYwhich according to the Financial Times is seriously considering the separation of its consulting and auditing divisions. Apparently, the company’s highest-ranking partners are already drawing up plans for this drastic change, which would be the largest in the group of consultants such as the group of the big four (KPMG, EY, Deloitte and PwC) in two decades. .
This very important step is, apparently, a measure designed for EY to free itself from the conflicts of interest that have arisen throughout the sector and that have led to numerous actions and measures by the regulatory authorities of various countries around the world. Both this consultancy and the other three that make up the group of the “big four” have received numerous criticisms for their alleged lack of independence in the audits of company accounts they carry out, especially for the fees they charge for their consultancy work and advice on agreements and taxes.
Audit consultants are dedicated to examining company accounts and checking the strength of the numbers, as well as confronting their management when they believe that some accounts or operations do not make sense. But the actions in this sense of KPMG, Deloitte, EY and PwC have been involved in controversy in recent years, and they have even had to face several sanctions for not carrying out audits correctly.
If EY finally decides to take the aforementioned step, it would mean a change in the way consultants act, a sector that is being scrutinized around the world with an increasingly critical eye, after the big four have been involved in several scandals, among which there are several bankruptcies and serious financial problems of previously audited companies, such as BHS or Carillion.
The EY management plans would go through creating an audit company independent of the rest of the business. Experts from various areas, such as those related to taxes, would stay there to support company audits. The ultimate structure of the companies that would result from the split is still being debated, and any far-reaching change would require a vote by the partners and broad agreement by the individual national firms that make up EY’s global business. Apart, of course, from the approval of the corresponding regulatory authorities.
For now, the consultant is trying to concretize a concrete structure, which is suitable for all parties. The process, if approved and moving forward, would take months to complete, and may be separate from other restructurings at EY. But there is still no decision made, as they underline from the consultant.
