| 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[1] |
| Area served | Worldwide |
| Key people | Jim Turley (Chairman & CEO)[2] |
| Services | Audit Tax Financial Advisory Consultancy |
| Revenue | US$22.9 billion[3] |
| Employees | 152,000 (Global) |
| Divisions | Assurance, Advisory, Tax, Transactions |
| Website | EY.com |
Ernst & Young (EY) is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers (PwC).
Ernst & Young is a global organization of member firms in more than 140 countries, headquartered in London, UK.[4]
It was ranked by Forbes magazine as the 9th largest private company in the United States in 2010.[5]
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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.[6] 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.[6]
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.[6]
As early as 1924 these American firms allied with prominent British firms, Young with Broads Paterson & Co. and Ernst with Whinney Smith & Whinney.[6] In 1979 this led to the formation of Anglo-American Ernst & Whinney, creating the fourth largest accountancy firm in the world.[6] Also in 1979, the European offices of Arthur Young merged with several large local European firms, which became member firms of Arthur Young International.
In 1989, the number four firm Ernst & Whinney merged with the then number five, Arthur Young, on a global basis to create Ernst & Young.[7]
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.[8]
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.[9]
In 2002 EY merged with many of the ex-Arthur Andersen practices around the world, although not those in the UK, China or the Netherlands.[10]
In 2006 EY became the only big four to have two member firms in the United States with the inclusion of Mitchell & Titus, LLP, the largest minority-owned accounting firm in the United States.[11][12]
In 2011 EY acquired Partake Consulting, an enterprise intelligence firm.[13]
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.[14] This is different from other professional services networks which are more centrally managed.
The four areas are:
Each area has an identical business structure and one management team that is led by an Area Managing Partner is part of the Global Executive board. The aim of this structure is to effectively cater for an increasingly global clientele, who have multinational interests.
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EY has four main service lines and share of revenues in 2010:[15]
The firm's name arises from the global merger between Ernst & Whinney and Arthur Young in 1989.[6] The motto of the firm is "Quality In Everything We Do".[16]
The firm was ranked No. 1 in BusinessWeek's annual list of Best Places To Launch a Career for 2008.[17]
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.[18]
Ernst & Young was ranked 4th in Universum's America's Ideal Employers list 2011[19] and 3rd in its Global Top Employers list.[20]
The firm was No. 34 in ComputerWorld's 100 Best Places To Work For In IT for 2009.[21]
The firm was also placed among the top 50 places in the Where Women Want to Work awards for 2007.[22]
The firm was named as one of the 10 Best Companies for Working Mothers by Working Mothers magazine in 2006.[23]
In April 2009, Reuters reported that Ernst & Young launched an initiative encouraging its staff in China to take 40 days of low-pay leave between July 2009 and June 2010. Those who participate get 20 percent of regular salary plus benefits of full-time employee. It applies to employees in Hong Kong, Macau and mainland China where the firm employs 8,500 in total.[24]
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."[25]
In January 2009, in the Anglo Irish Bank hidden loans controversy, EY was criticised by politicians[26] 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.[27][28] The then Chief Executive of Financial Regulation at the Central Bank of Ireland 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.[29] EY declined to appear before the same committee after receiving legal advice.[30][31] EY subsequently said their non-appearance was due to wanting not to be part of the media debate around the issue.[32] 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"[33] and into the performance of its auditors, EY.[34][35]
On 4 September 2009, EY, the former auditors of Sons of Gwalia, agreed to a A$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.[36]
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.[37]
The Valukas Report by bankruptcy court examiner, Anton R. Valukas, issued on 11 March 2010,[38] charged that Lehman Brothers engaged in a practice known as repo 105 and that Ernst & Young, Lehman's auditor, was aware of it. New York prosecutors, headed by Governor-elect Andrew Cuomo, announced on 21 December 2010[39] that they have sued the firm for fraud charges related to repo 105 and the collapse of Lehman Brothers. Charles Perkins, a spokesman for the firm said that last audit of Lehman Brothers was for the fiscal year ending 30 November 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).[40][41][42]
In December, 2009, Ernst & Young agreed to pay an $8.5 million fine – one of the highest settlements ever paid by an accounting firm – to the Securities and Exchange Commission for its work auditing the books of Bally Total Fitness. The firm agreed to an order that it cease and desist from violating securities laws. Six current and former Ernst partners, including Randy G. Fletchall, the partner in charge of the firm’s national office, were also sanctioned by the commission in one of its most sweeping actions against auditors involved in a failed audit. Two current Ernst partners who had worked for the national office and been involved with Bally audits, Mark V. Sever and Kenneth W. Peterson, were barred by the S.E.C. from auditing public companies for at least two years. The three former partners named by the commission were Thomas D. Vogelsinger, William J. Carpenter and John M. Kiss. Each was barred from auditing public companies, Vogelsinger for at least nine months, Carpenter for at least two years, and Kiss for at least three years.[43]
Ernst & Young's publicity activity includes its worldwide Entrepreneur of the Year program, run in 50 countries.[44]
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.[45]
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.[46]
EY sponsors the ITEM club.[47]
On 8 September 2011, Rio 2016 made the announcement that Ernst & Young will be a tier 2 official sponsor of the XXXI Olympic Summer Games to be held in Brazil, as the exclusive provider of professional services – consulting and auditing – for Rio 2016 organizing committee.[48]
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