EDINBURGH — Big Four audit firm EY has had a bumper year. Its revenues hit a record $35bn, with its auditors making a significant contribution to this income. It’s little wonder, then, that EY bosses will do whatever it takes to keep its audit business safe from competition and other threats. There is a perception that KPMG, Deloitte, PwC and EY have an unfair advantage by dominating the audits of big firms and then also getting their tentacles into lucrative consulting work. This cosy position has enabled companies like KPMG to work with the corrupt and turn a blind eye to dodgy financial dealings in the companies of the books they audit. EY boss Mark Weinberger has made an attempt to persuade global business stakeholders that his company and the others in the cartel should be left alone to keep generating lucrative fees. – Jackie Cameron
By Thulasizwe Sithole
The global chief executive of EY has hit back at calls for the Big Four accounting firms to be broken up in response to mounting criticism of the severe lack of competition in the audit market, reports the Financial Times.
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Mark Weinberger said EY, which on Thursday reported record global revenues of nearly $35bn, needed to draw on expertise from across its business in order to conduct high-quality audits for multinational clients.
“His comments come in response to pressure in Europe and Australia for some form of government intervention in the market, which is dominated by four companies: EY, KPMG, PwC and Deloitte. In the US, the Big Four audit 99 per cent of members of the S&P 500 index,” says the FT.
Weinberger, who has run EY’s global business for five years, having previously worked in its tax practice, claimed he “would love to encourage more entrants and have more choice [in the audit market] in the UK and around the world”.
But he told the FT: “When we bring an audit team out to a client, it is made up of a team of technology experts, tax experts and valuation experts, who all sell time into that audit. “We audit Google, Amazon, Facebook, Salesforce and Oracle — you could not serve those clients without a multidisciplinary group of people to assess their risks going forward as a business, and [those employees] don’t all sit in our audit practice. People lose sight of that.
“I believe that a multi-disciplinary practice enhances our audits,” he continued.
EY’s results showed that its audit practice remained its most important division in the financial year ending in June, accounting for 36 per cent of global revenues, points out the FT.
“However, the audit practice’s 4 per cent year-on-year growth was the slowest of its four divisions, with its advisory business registering a 10 per cent increase in revenues to $9.6bn and transaction advisory services up 14 per cent to $3.6bn.
“The tax practice increased 6 per cent to $8.9bn. Meanwhile, the firm’s headcount rose 5.7 per cent to 261,559 in the year, with the biggest increases in its advisory and transaction advisory arms. Headcount in the audit practice increased 2.6 per cent to 88,849, compared with 12 per cent rises in advisory and transaction advisory.”
Weinberger said the value the audit profession brought to business and wider society had not been sufficiently recognised by its critics. EY, he said, spent $500m on training staff across all areas of its business in the latest financial year, for instance, but this investment in its workforce had not been widely recognised.
“People don’t recognise the value we bring — the profession is working really hard. We are [making] massive investments in technology to improve audit quality, which is something businesses and government want to hire us for. It is not like we are trying to keep people out of the market.”
