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Revision as of 17:24, 6 November 2009

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Ernst & Young
Company typeMember firms have different legal structures, USA and UK: Limited Liability Partnership
IndustryProfessional services
Founded1989; individual components from 1849
HeadquartersLondon, England, UK (EY Global)
Key people
Jim S. Turley, Chairman and CEO[1]
ServicesAudit
Tax
Financial advisory
Revenue$24.523 billion USD (2008) [2]
Number of employees
144,000 (Global)
DivisionsAssurance, Advisory, Tax, Transaction
(See below)
Websitewww.ey.com

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EY offices in New York.

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EY offices in London, at More London Place near Tower Bridge.

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EY offices in Sydney.

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EY offices in Detroit.
File:Amtsb.jpg
EY office in Bahrain located in the Almoayyed Tower.

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EY offices in Riyadh.

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EY offices in Munich.

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EY offices in Toronto.

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Ernst & Young (or "EY") 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 2008 it is also the 9th largest private company in United States[3].

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.[4]

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 and Theodore Ernst 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 merged with the then number five, Arthur Young, on a global basis to create Ernst & Young ("EY")[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 consulting firm 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 Global does not perform client work. It sets global standards and oversees global policy and consistency of service. Client work is performed by the member firms. Each EY member country is organised as part of one of five areas:[10]

  • EMEIA: Europe, Middle East, India, Africa
  • 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.

On 1 July 2008, EY received approval from partners to integrate all of its 87 country practices in Europe, the Middle East, India, Pakistan and Africa to create a single EMEIA managerial entity [11], effective from 1 July 2008.

Services

EY has four main service lines:[12]

  • Assurance. This comprises mainly financial audit (core assurance) with 54% of total revenues in 2007.
  • Advisory Services consisting of three subservice lines: IT Risk and Assurance, Risk, and Performance Improvement. Advisory services accounted for 12% of revenues in 2007.
  • 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), includes commercial, financial, real estate and tax due diligence, mergers & acquisitions, valuation & business modeling, corporate restructuring and integration services.

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.[13]

Staff

The firm was ranked No.1 in BusinessWeek's annual list of 'Best Places To Launch a Career' for 2008.[14]

The firm was ranked No.25 in the Fortune list of '100 Best Companies To Work For', and the highest among the Big Four, for 2007.[15]

The firm is No.36 in ComputerWorld's 100 Best Places To Work For In IT for 2008.[16]

The firm was also placed among the Top 50 Places in the 'Where Women Want to Work' awards for 2007.[17]

The firm was named as one of the '10 Best Companies for Working Mothers' by Working Mothers magazine in 2006.[18]

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."[19]

Anglo Irish Bank

In January 2009, in the Anglo Irish Bank hidden loans controversy, EY was criticised by politicians[20] 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.[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] The Chartered Accountants Regulatory Board has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"[25] and into the performance of EY.[26]

Sons of Gwalia

On 4 September 2009, Ernst & Young, the former auditors of Sons of Gwalia, agreed to a $ 125 million settlement over their role in the gold miner’s collapse in 2004. Ferrier Hodgson, the company's administrator, had claimed Ernst & Young was negligent over the accounting of gold and dollar hedging contracts. However, Ernst & Young said, the proposed settlement was not an admission of any liability.[27]

Akai Holdings

On 11 October 2009, Ernst & Young reached a legal settlement where they agreed to pay US$200 million to the liquidators of Akai Holdings. It was alleged that E&Y falsified court documents to avoid negligence charges which led to police raiding the Hong Kong office.[28]

Sponsorship

Ernst & Young's publicity activity includes its worldwide Entrepreneur of the Year program, run in 50 countries.[29]

EY UK also publicizes itself by sponsoring big name art exhibitions, eg Cézanne, Picasso, Bonnard and Monet. This year's exhibitions were Rodin at the Royal Academy of Arts and Renoir at the National Gallery.[30]

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 maths literacy in children.[31]

EY sponsors the ITEM club.[32]

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. ^ Forbes: Largest Private Companies
  4. ^ Hoovers. Retrieved 25 November 2006.
  5. ^ a b c d e 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 to form single business
  12. ^ Ernst & Young Service lines brochure
  13. ^ www.ey.com Our history
  14. ^ BusinessWeek: The Best Places to Launch a Career
  15. ^ Fortune: 100 Best companies to work for
  16. ^ ComputerWorld: 100 Best Places To Work For In IT
  17. ^ Times-on-line: Where women want to work
  18. ^ Working Mother
  19. ^ BBC News (2005). Equitable drops High Court action. Retrieved 26 August 2006.
  20. ^ Where were the auditors?
  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. ^ Drumm resigns as chief executive of Anglo Irish
  26. ^ Statement from CARB
  27. ^ Ernst &Young agrees to $125m Sons of Gwalia settlement The West Australian, published: 4 September 2009, accessed: 4 September 2009
  28. ^ "Ernst & Youngs US$200m snag". South China Morning Post. 12 October 2009. Retrieved 12 October 2009.
  29. ^ Ernst & Young Entrepreneur of the Year Awards
  30. ^ Royal Academy
  31. ^ Cyberchase - PBS Kids Official PBS Kids Website with corporate sponsorships.
  32. ^ Ernst & Young Item Club appoints new Chief Economist

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