Home » UK Business News » Ernst & Young scraps plan to split business under ‘Project Everest’

Ernst & Young scraps plan to split business under ‘Project Everest’

By Nithya Bose in UK Business News, posted April 15, 2023

Accounting giant Ernst & Young has abandoned a plan to split its auditing and consulting divisions.

After its US arm opted not to proceed, the company declared it was "stopping work on the project."

The Big Four - Deloitte, EY, KPMG, and PwC - dominate most global accounting markets.

The initiative was announced as regulators demanded massive industry reforms due to conflicts of interest and poor working conditions.

If the "Project Everest" deal had gone through, it would have been the largest shake-up in the accounting sector in almost two decades.

EY's statement ends a year-long effort to get internal approval for splitting the units.

An internal note said: "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.

"We also recognise that we need more time to make the necessary investments to prepare the businesses for a separation."

Financial supervisory bodies in the US, the UK, and Europe have voiced concern about huge accounting firms.

They claim they cannot act fairly as auditors for clients who also use their consultancy services.

The project cost the company more than $100 million.

Germany's accounting watchdog penalised and barred EY earlier this month for its handling of audits for Wirecard, the insolvent electronic payment processor.

The firm owes creditors about $4 billion after admitting that hefty money never existed on its records as part of a global fraud scheme.

EY is prohibited from accepting big new audit engagements for the next two years.

After high-profile business failures like construction giant Carillion and department store chain BHS, UK regulators called for a decrease in the Big Four's dominance in 2021.

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The Financial Reporting Council fined BHS's auditor PwC a record £6.5m.

Last year, the US Securities and Exchange Commission (SEC) fined EY $100 million.

Its auditors were found cheating on the exam required to gain and keep their Certified Public Accountant licence.

That was the most severe penalty imposed on an audit company accused of deceiving investigators.

Source: BBC

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