Ernst & Young

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Ernst & Young
Type Member firms have different legal structures, USA and UK: Limited Liability Partnership
Founded 1989; individual components from 1849
Headquarters London, England (Global) & New York City, United States (National)
Key people Jim S. Turley, Global Chairman and CEO
Industry Professional services
Services Audit
Tax
Financial advisory
Revenue ▲$21.1 billion USD (2007)
Employees 130,000 (Global)
Divisions AABS, Tax, TAS
(See below)
Website www.ey.com

Ernst & Young is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers (PwC), Deloitte Touche Tohmatsu (Deloitte) and KPMG. According to Forbes Magazine, as of year 2007 it is also the 7th largest private company in US[1]. Ernst & Young is a global organization consisting of many member firms. It is based at London, UK and the US firm is headquartered at 5 Times Square, New York, NY.[2]

Contents

[edit] History

EY offices in New York.
EY offices in New York.
EY offices in London, at More London Place near Tower Bridge.
EY offices in London, at More London Place near Tower Bridge.
EY offices in Sydney.
EY offices in Sydney.
EY offices in Detroit at Campus Martius Park.
EY offices in Detroit at Campus Martius Park.
EY offices in Warsaw.
EY offices in Warsaw.
EY offices in Istanbul at Beytem Plaza.
EY offices in Istanbul at Beytem Plaza.

[edit] America and UK

The company (partnership) is the result of a series of mergers of ancestor organizations. The oldest originating partnership was founded in 1849 in England as Harding & Pullein.[3] In that year the firm was joined by Frederick Whinney. He was made a partner in 1859 and with his sons in the business it was renamed Whinney, Smith & Whinney in 1894.[3]

In 1903, the firm of Ernst & Ernst was established in Cleveland by Alwin and Theodore Ernst and in 1906 Arthur Young & Company was set up by the Scotsman Arthur Young in Chicago.[3]

As early as 1924 these American firms allied with prominent British firms, Young with Broads Paterson & Co. and Ernst with Whinney Smith & Whinney.[3] In 1979 this led to the formation of Anglo-American Ernst & Whinney, creating the fourth largest accountancy firm in the world.[3] In 1989, the number four merged with the then number five, Arthur Young, to create Ernst & Young ("EY")[4].

[edit] Rest of the world

EY ancestor firms opened offices around the world in order to service their international clients. In 1979 the European offices of Arthur Young joined several large local European firms, which themselves became member firms of Arthur Young International. The big merger in 1989, creating Ernst & Young, was effected by mergers between Ernst & Whinney offices and Arthur Young member firms in all countries involved.

[edit] Global structure

Each EY member country is organised as part of one of five areas:

  • Europe, Middle East, India & Africa (EMEIA)
  • Americas
  • Far East
  • Oceania
  • Japan

Each area has a single management team that is led by an Area Managing Partner who sits on the Global Executive Board. All areas are integrating their business models, including partner pay.

EY has received approval from partners to integrate all of its 87 country practices in Europe, the Middle East, India and Africa to create EMEIA on 1 July 2008 [5], effective from July 1, 2008. This new area will have a single management team and pooling of profits.

[edit] Service lines and Growth

EY has three main service lines:

  • Assurance and Advisory Business Services (AABS). This comprises mainly financial audit (core assurance) with 54% of total revenues and advisory services with 12% of revenues in 2007. Advisory services comprise Technology and Security Risk Services "TSRS", Fraud Investigation and Dispute Services "FIDS", Business Risk Services "BRS" and various specialty advisory services.
  • Tax Services share of total revenues in 2007 was 22% and includes Business Tax Compliance, Human Capital, Indirect Tax, International Tax Services, Tax Accounting & Risk Advisory Services, Transaction Tax.
  • Transaction Advisory Services (TAS), by far the smallest service line, includes commercial, financial, real estate and tax due diligence, mergers & acquisitions, corporate restructuring and integration services.

As of 2007, TAS led the service line growth, achieving a 29% revenue increase, reflecting Ernst & Young's involvement in some of the largest deals over the period, including activity in the emerging markets, and the demand from Private Equity clients. Tax revenue improved by 18%, owing to demand for these services, particularly in the Far East and Americas. The continued demand for assurance and risk-based services, together with the call for business advisory services, enabled AABS revenue to grow by more than 16%.

In the seven areas, US dollar growth has been as follows: 10% in the Americas; 22% in Northern Europe, Middle East, India and Africa; 16% in Central Europe; 17% in Continental Western Europe; 27% in the Far East; 16% in Oceania, and 21% in Japan. Notably, in places where strategic investments have been made — such as China, India and Russia — growth in excess of 30% has been achieved. [6]

[edit] Acquisitions and divestitures

In October 1997, EY announced plans to merge their global practices with KPMG to create the largest professional services organization in the world, coming on the heels of another merger plan announced in September 1997 by Price Waterhouse and Coopers & Lybrand. The merger plans were abandoned in February 1998 due to client opposition, antitrust issues, cost problems and difficulty of merging the two diverse companies and cultures[7].

EY built up its consultancy arm heavily during the 1980s and 90s. The U.S. Securities and Exchange Commission and members of the investment community began to raise concerns about potential conflicts of interest between the consulting and auditing work amongst the Big Five. In May 2000, EY was the first of the firms to formally and fully separate its consulting practices via a sale to the French IT services company Cap Gemini for $11 billion, largely in stock, creating the new consulting firm of Cap Gemini Ernst & Young, which was later renamed Capgemini[8].

In 2002, EY merged with many of the ex-Arthur Andersen practices around the world, although not those in the USA, UK or the Netherlands[9].

[edit] Audit clients

EY is the auditor for global corporations, including the following (as verified by their annual reports):

[edit] Publicity

Ernst & Young's publicity activity includes its worldwide Entrepreneur of the Year program, run in 39 countries.[10] Previous Entrepreneur Of The Year winners include Jeff Bezos of Amazon.com, Pierre Omidyar of eBay, Sergey Brin and Larry Page of Google, Howard Schultz of Starbucks, Catherine L. Hughes and Alfred Liggins of Radio One, and Jim McCann of 1-800-Flowers.com.

EY UK also publicizes itself by sponsoring big name art exhibitions, eg Cezanne, Picasso, Bonnard and Monet. This year's exhibitions were Rodin at the Royal Academy of Arts and Renoir at the National Gallery.[11] Ernst & Young UK is based at More London.

In April 2004, Equitable Life, a UK life assurance company, sued EY after nearly collapsing following a House of Lords judgement that it had to pay guaranteed annuities held by its policyholders. Equitable claimed that EY neglected its duty as auditor and demanded £4bn in compensation. Equitable abandoned the case in September 2005 and paid EY's legal costs. EY described the case as "a scandalous waste of time, money and resources for all concerned."[12]

[edit] People

The firm is No.25 in the Fortune list of 100 Best Companies To Work For (and the highest among the Big Four).[13]

The firm was also placed among the Top 50 Places in the Where Women Want to Work awards for 2007.[14]

The firm was named as one of the 10 Best Companies for Working Mothers by Working Mothers magazine in 2006.[15]

[edit] Notable current and former employees

[edit] Business

[edit] Politics and public service

  • John Campbell - Member of the U.S. House of Representatives (2005-present)
  • Jun Choi - Mayor of Edison, New Jersey (2006-present)
  • Christopher Chope - Member of the British Parliament (1983-92; 1997-present)
  • Sheila Fraser - Auditor General of Canada (2001-present)
  • Cheryl Gillan - Member of the British Parliament (1992-present)
  • George McCarthy - Chief Secretary of the Cayman Islands (2004-present)
  • Edward H Ntalami - CEO of the Kenyan Capital Markets Authority (2002-present)
  • Mark Olson - Current Chairman of the Public Company Accounting Oversight Board
  • Hugo Schiltz - Belgian Senator (1992-95)
  • Johnathan Wu - General Counsel for the U.S. Department of Housing and Urban Development (2005-2006)
  • Zulfiqar Ali Bhutto - President of Pakistan (1971-1973), Prime Minister of Pakistan (1973-1977) - It may be noted that Bhutto worked for S.R. Batliboi & Company, India, which in the 1990s, became the sole member firm of Ernst & Young in India
  • Siegbert Alber - Advocate General of the European Court of Justice and founder of leading EU lobbying law firm Alber & Geiger

[edit] Other

[edit] References

  1. ^ Forbes: Largest Private Companies
  2. ^ Hoovers. Retrieved 25 November 2006.
  3. ^ a b c d e Ernst & Young - History
  4. ^ Reports say Arthur Young and Ernst may merge New York Times, May 1989
  5. ^ Ernst & Young to form single business
  6. ^ 2007 Revenues Report Ernst & Young fiscal year 2007 global revenues rise 15% to US$21.1 billion
  7. ^ Accountancy merger off
  8. ^ Cap Gemini to acquire Ernst & Young consulting business New York Times, March 2000
  9. ^ Ernst & Young acquires Anderson India
  10. ^ Ernst & Young Entrepreneur of the Year Awards
  11. ^ Royal Academy
  12. ^ BBC News (2005). Equitable drops High Court action. Retrieved 26 August 2006.
  13. ^ Fortune: 100 Best companies to work for
  14. ^ Times-on-line: Where women want to work
  15. ^ Working Mother

[edit] External links

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Big Four auditors