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Well, they do say that breaking up is hard to do, and that goes for multibillion-dollar firms as well as that first high school crush.
Big Four accounting firm Ernst & Young called off a split between its consulting and auditing arms after American audit partners rejected the plan, according to news reports. EY announced the plan to split in September of last year and has already spent $100 million on the plan, according to the Wall Street Journal.
However, the plan sputtered over disagreements about how to split up the lucrative American tax practice, according to the WSJ, and the firm pulled the plug on the deal on Tuesday.
Had the deal gone through, it would have been a seismic shift for how the Big Four accounting firms do business, which now rely on consulting fees for a big part of their revenue. Non-audit fees have ballooned at the Big Four, rising from $58.6 billion in 2011 to $115 billion in 2021, while auditing fees generated by the firms have stayed relatively stable.
However, businesses are paying more for audits in recent years, according to the Financial Education and Research Foundation.
The big accounting firms have been under fire for some time to split their audit and consulting arms after a recent series of major auditing scandals like Wirecard, Carillion, and NMC raised questions about potential conflicts of interest. EY was the first to announce such a division, but now it is starting from scratch.—DA