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In the age-old battle between quantity and quality, Ernst & Young is shifting toward doing less but doing it better.
The biggest of the big four (at least for now) saw 84 audit clients leave since January 2023, the Wall Street Journal reported, based on data from Ideagen Audit Analytics. EY told the Journal that it thinned its roster to improve the quality of its audits. Those audits had the distinction of leading the Big Four in deficiencies last year, according to the Public Company Accounting Oversight Board.
Among the departed clients: biopharma manufacturer Catalent, electric semi-truck maker Nikola, and SL Green Realty, a real estate investment trust.
EY has also added fewer new clients: just 21 since 2023. That’s also (at least partially) on purpose, according to unnamed sources the Journal cited.
The departures cost EY $215 million in audit fees from 2023 through mid-August, the Journal reported, while 21 new clients offset that loss by $31 million. EY was alone among Big Four firms in its net losses of both clients and fee revenue. PwC added four clients, KPMG 13, and Deloitte 46.
On top for now. Deloitte got more of EY’s departing clients (22) than any other firm, which is fitting, as it narrows the gap between itself and EY in its share of public company audit opinions. Deloitte, which issued 9.8% of opinions in 2014, according to Ideagen data, climbed to 12.5% this year, while EY holds the same 13.5% share (with fluctuations in the intervening decade).
While acknowledging that “market share is important,” it’s “not as important as transforming our audit practice and driving higher quality audits,” Dante D’Egidio, EY’s vice chair for assurance in the Americas, told the Journal.
Progress report. While EY’s 37% deficiency rate led the Big Four in 2023, according to the PCAOB report, it’s at least better than the 46% it had in 2022. The report, released in August, “shows that we’re moving in the right direction,” D’Egidio said.