Ernst & Young

Ernst & Young
Type Member firms have different legal structures, USA and UK: Limited Liability Partnership
Industry Professional services
Founded 1989; individual components from 1849
Headquarters London, United Kingdom
Area served Worldwide
Key people Jim Turley (Chairman & CEO)[1]
Services Audit
Tax
Financial advisory
Business Advisory
Revenue decreaseUS$21.4 billion (2009)[2]
Employees 144,000 (Global)
Divisions Assurance, Advisory, Tax, Transaction
Website EY.com
EY offices in New York
EY office in London, at More London Place near Tower Bridge
EY offices in Sydney
EY offices in Detroit
EY office in Bahrain located in the Almoayyed Tower
EY offices in Munich
EY offices in Toronto

Ernst & Young (EY) is one of the largest professional services firms in the world and one of the Big Four auditors, along with PricewaterhouseCoopers (PwC), Deloitte and KPMG.

Ernst & Young is a global organization of member firms in more than 140 countries. Its global headquarters are based in London, UK and the U.S. firm is headquartered at 5 Times Square, New York, New York.[3]

As of 2009, it is ranked by Forbes magazine the 10th largest private company in the United States.[4]

Contents

History

Early history

Ernst & Young is the result of a series of mergers of ancestor organizations. The oldest originating partnership was founded in 1849 in England as Harding & Pullein.[5] 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.[5]

In 1903, the firm of Ernst & Ernst was established in Cleveland by Alwin C. Ernst and his brother Theodore and in 1906 Arthur Young & Co. was set up by the Scotsman Arthur Young in Chicago.[5]

As early as 1924 these American firms allied with prominent British firms, Young with Broads Paterson & Co. and Ernst with Whinney Smith & Whinney.[5] In 1979 this led to the formation of Anglo-American Ernst & Whinney, creating the fourth largest accountancy firm in the world.[5] Also in 1979, the European offices of Arthur Young merged with several large local European firms, which became member firms of Arthur Young International.

Mergers

In 1989, the number four firm Ernst & Whinney merged with the then number five, Arthur Young, on a global basis to create Ernst & Young.[6]

In October 1997, EY announced plans to merge its 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 had 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 and 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 company of Cap Gemini Ernst & Young, which was later renamed Capgemini.[8]

Recent history

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

Global structure

EY is the most globally managed of the Big Four firms. EY Global sets global standards and oversees global policy and consistency of service, with client work being performed by its member firms. Each EY member country is organised as part of one of four areas:[10]

Each area has a single and business structure and management team that is led by an Area Managing Partner who sits on the Global Executive board.

Services

EY has four main service lines and share of revenues in 2007:[11]

Major clients

EY is the auditor for many of the world's leading corporations, including the following (as verified by their annual reports):

Name and branding

The firm's name arises from the global merger between Ernst & Whinney and Arthur Young in 1989.[12]

Staff

The firm was ranked No. 1 in BusinessWeek's annual list of Best Places To Launch a Career for 2008.[13]

The firm was ranked No. 44 in the Fortune list of 100 Best Companies to Work For, and the highest among the Big Four, for 2009.[14]

The firm was No. 36 in ComputerWorld's 100 Best Places To Work For In IT for 2008.[15]

The firm was also placed among the top 50 places in the Where Women Want to Work awards for 2007.[16]

The firm was named as one of the 10 Best Companies for Working Mothers by Working Mothers magazine in 2006.[17]

Criticisms

Equitable Life

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 £2.6bn in compensation. Equitable abandoned the case in September 2005 and each side agreed to pay their own legal costs. EY described the case as "a scandalous waste of time, money and resources for all concerned."[18]

Anglo Irish Bank

In January 2009, in the Anglo Irish Bank hidden loans controversy, EY was criticised by politicians[19] and the shareholders of Anglo Irish Bank for failing to detect large loans to Sean FitzPatrick, its Chairman, during its audits. The share price fell by almost 99% and the Irish Government had to subsequently take full ownership of the Bank, at a cost of €5,500 for every man, woman and child in the country.[20][21] The then Chief Executive of the Financial Regulator told a parliamentary committee that "a lay person would expect that issues of this nature and this magnitude would have been picked up” by the external auditors.[22] EY declined to appear before the same committee after receiving legal advice.[23][24] EY subsequently said their non-appearance was due to wanting not to be part of the media debate around the issue.[25] The Chartered Accountants Regulatory Board appointed John Purcell, former comptroller and auditor general, to investigate into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"[26] and into the performance of its auditors, EY.[27][28]

Sons of Gwalia

On 4 September 2009, EY, the former auditors of Sons of Gwalia, agreed to a AU$125m settlement over their role in the gold miner’s collapse in 2004. Ferrier Hodgson, the company's administrator, had claimed EY was negligent over the accounting of gold and dollar hedging contracts. However, EY said that the proposed settlement was not an admission of any liability.[29]

Akai Holdings

On 11 October 2009, EY reached a legal settlement where they agreed to pay US$200 million to the liquidators of Akai Holdings. It was alleged that EY falsified court documents to avoid negligence charges which led to police raiding the Hong Kong office.[30]

Lehman Brothers

The Valukas Report by bankruptcy court examiner, Anton R. Valukas, issued on March 11, 2010,[31] says that Lehman Brothers engaged in a practice known as repo 105 and that EY, Lehman's auditor, was aware of it. Charles Perkins, a spokesman for EY said that last audit of Lehman Brothers was for the fiscal year ending November 30, 2007 and that in EY's opinion, Lehman’s financial statements for that year were fairly presented in accordance with Generally Accepted Accounting Principles (GAAP).[32][33][34] The AADB announced an investigation on 16 June 2010.[35]

Sponsorship

Ernst & Young's publicity activity includes its worldwide Entrepreneur of the Year program, run in 50 countries.[36]

EY UK also publicizes itself by sponsoring exhibitions of works by famous artists, such as Cézanne, Picasso, Bonnard, Monet, Rodin and Renoir. The most recent of these was Maharaja: the Splendour of India's Royal Courts at the Victoria and Albert Museum.[37]

In addition, EY publicizes itself by sponsoring the educational children's show Cyberchase on PBS Kids under the PBS Kids GO! television brand, in an effort to improve mathematics literacy in children.[38]

EY sponsors the ITEM club.[39]

Notable current and former employees

Business

Politics and public service

Other

References

  1. ↑ Ernst & Young: Jim Turley
  2. ↑ Ernst & Young Global Limited Company Profile
  3. ↑ Hoovers. Retrieved 25 November 2006.
  4. ↑ "America's Largest Private Companies". Forbes. 2009-10-28. http://www.forbes.com/lists/2009/21/private-companies-09_Americas-Largest-Private-Companies_Rank.html. Retrieved 2010-02-28. 
  5. ↑ 5.0 5.1 5.2 5.3 5.4 Ernst & Young - History
  6. ↑ Reports say Arthur Young and Ernst may merge New York Times, May 1989
  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 consolidates global structure
  11. ↑ Ernst & Young Service lines brochure
  12. ↑ www.ey.com Our history
  13. ↑ BusinessWeek: The Best Places to Launch a Career
  14. ↑ Ernst & Young LLP named to FORTUNE’s “100 Best Companies to Work For” list for the 12th year in a row
  15. ↑ ComputerWorld: 100 Best Places To Work For In IT
  16. ↑ Times-on-line: Where women want to work
  17. ↑ Working Mother
  18. ↑ BBC News (2005). Equitable drops High Court action. Retrieved 26 August 2006.
  19. ↑ Where were the auditors?
  20. ↑ The Cost of Anglo-Irish Bank
  21. ↑ Anglo's board and auditors criticised at egm Shareholders told FitzPatrick owed bank a total of €129m in 2007
  22. ↑ FitzPatrick Anglo loans were more than €87m
  23. ↑ Anglo's external auditors decline to appear before oireachtas committee
  24. ↑ RTE News
  25. ↑ Ernst & Young 'proud' of their work with Anglo
  26. ↑ Drumm resigns as chief executive of Anglo Irish
  27. ↑ "Press Release Further appointments for Purcell". Chartered Accountants Regulatory Board. 2009-03-25. https://www.carb.ie/en/Public-Communications/Press-Releases/Statement-by-the-CARB/. 
  28. ↑ "Accountancy watchdog seeks to widen inquiry into Anglo Irish". 2009-03-26. http://www.accountancyage.com/accountancyage/news/2239257/accountancy-watchdog-seeks. Retrieved 2010-03-01. 
  29. ↑ Ernst &Young agrees to $125m Sons of Gwalia settlement The West Australian, published: 4 September 2009, accessed: 4 September 2009
  30. ↑ "Ernst & Youngs US$200m snag". South China Morning Post. 12 October 2009. http://docs.google.com/gview?a=v&q=cache:nj1xrpgaQgUJ:www.borrelliwalsh.com/documents/News2009101202.pdf+ernst+%26+young's+us$200m+snag&hl=en&gl=us&pid=bl&srcid=ADGEESg-WcdZqa1k6kMWhNMFFBEBgTlJKu2lSy2KyKJzPrydqbCemyf4fzRfZlrB0ETSVmWSArFF13K07PghIKRKwaDUxMyVJqxvSWIQE_S2tjWctHjasoKmc63iFz2Igy2m0vik5YPi&sig=AFQjCNGaklnFISzUZLCrWbAe0vEB3oQzVw. Retrieved 12 October 2009. 
  31. ↑ Lehman Directors did not breach duties examiner finds
  32. ↑ Lehman Cooked Books before Collapse, Report Finds
  33. ↑ Court-Appointed Lehman Examiner Unveils Report
  34. ↑ Lehman smoking gun leaves E&Y facing questions
  35. ↑ Ernst & Young investigated over Lehman audit, Daily Telegraph, 16 Jun 2010
  36. ↑ Ernst & Young Entrepreneur of the Year Awards
  37. ↑ Maharaja: the Splendour of India's Royal Courts
  38. ↑ Cyberchase - PBS Kids Official PBS Kids Website with corporate sponsorships.
  39. ↑ Ernst & Young Item Club appoints new Chief Economist

External links

Big Four auditors
Deloitte · Ernst & Young · KPMG · PwC