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Ernst & Young (EY) is one of the largest professional services firms in the world and one of the Big Four auditors, 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
It was ranked by Forbes magazine as the 9th largest private company in the United States in 2010.
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. 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.
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.
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.
Recent history
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.
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:
EMEIA: Europe,Middle East, India and Africa
Americas
Asia-Pacific
Japan
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.
Services
EY has four main service lines and share of revenues in 2010:
Assurance (47%): comprises Financial Audit (core assurance), and Fraud Investigation & Dispute Services.
Advisory Services (17%): consisting of four subservice lines: Actuarial, IT Risk and Assurance, Risk, and Performance Improvement.
Tax Services (27%): includes Business Tax Compliance, Human Capital, Indirect Tax, International Tax Services, Tax Accounting & Risk Advisory Services, Transaction Tax.
Transaction Advisory Services (TAS) (9%): includes commercial, financial, real estate and tax due diligence, mergers & acquisitions, valuation & business modeling, corporate restructuring and integration services.
Name and branding
The firm's name arises from the global merger between Ernst & Whinney and Arthur Young in 1989.
Staff
The firm was ranked No. 1 in
BusinessWeek's annual list of Best Places To Launch a Career for 2008.
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.
The firm was No. 36 in ComputerWorld's 100 Best Places To Work For In IT for 2008.
The firm was also placed among the top 50 places in the Where Women Want to Work awards for 2007.
The firm was named as one of the 10 Best Companies for Working Mothers by Working Mothers magazine in 2006.
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.
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."
Anglo Irish Bank
In January 2009, in the
Anglo Irish Bank hidden loans controversy, EY was criticised by politicians 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. 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. EY declined to appear before the same committee after receiving legal advice. EY subsequently said their non-appearance was due to wanting not to be part of the media debate around the issue. 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" and into the performance of its auditors, EY.
Sons of Gwalia
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.
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.
Lehman Brothers
The
Valukas Report by bankruptcy court examiner,
Anton R. Valukas, issued on March 11, 2010, charged that
Lehman Brothers engaged in a practice known as
repo 105 and that EY, Lehman's auditor, was aware of it. New York prosecutors, headed by Governor-elect Andrew Cuomo, announced on 21 December 2010 that they have sued EY for fraud charges related to
repo 105 and the collapse of
Lehman Brothers . 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).
Sponsorship
Ernst & Young's publicity activity includes its worldwide
Entrepreneur of the Year program, run in 50 countries.
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.
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.
EY sponsors the ITEM club.
Notable current and former employees
Business
Karan Bilimoria, Baron Bilimoria - Founder of Cobra Beer
Andrew Gould - Chairman and CEO of Schlumberger (2003–present)
Ed Grier - President of the Disneyland Resort (2006–present)
Chris Kubasik - CFO of Lockheed Martin (2001–present)
Sean Wise - venture capital commentator
Patricia A. Woertz - CEO of Archer Daniels Midland (2006–present)
Arthur Blank - co-founder of Home Depot, owner of the Atlanta Falcons
Jim Balsillie - co-CEO of Research In Motion (1992–present)
Michael T. Strianese - CEO of L-3 Communications (2006–present)
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)
Edward H Ntalami - CEO at his Kenyan Capital Markets Authority (2002–present)
John Howell - Member of the British Parliament (2008–present)
Hugo Schiltz - Belgian Senator (1992–1995)
Jeff McWaters - Member of the Virginia State Senate (2010–present)
Other
Kimberly Clarice Aiken - Miss America 1994
Genevieve Brame - author
Jeff Moss (born c. 1975) founder of the DEF CON and Black Hat technology conferences and member of the Homeland Security Advisory Council
References
External links
Ernst & Young global website
Category:Companies established in 1849
Category:Accountancy firms of the United Kingdom
Category:Companies based in London
Category:Privately held companies of the United Kingdom
Category:Companies based in New York City
Category:Accountancy firms of the United States
Category:Privately held companies of the United States
Category:International management consulting firms
