EY Rakes In $40 Billion In Global Revenue, Will Try Not to Suck So Much At Auditing
A day after Deloitte got the Big 4 revenue boasting season rolling yesterday, EY announced today that it pulled in a “solid” $40 billion ($39,959,000,000, to be exact) in revenue for the year ending June 30, a 7.3% increase over 2020’s $37.2 billion.
But aside from all the patting each other on the back for once again coming in third (probably) among the Big 4 in total revenue, the biggest news out of the EY camp today was this, courtesy of the Financial Times:
EY will invest about $2bn over the next three years to improve the quality of its audits following scandals including the collapse of German payments group Wirecard in a high-profile fraud last year.
The sum will be part of a record $10bn investment plan unveiled by the accounting firm on Wednesday that will fund initiatives including staff training and improving its ability to detect fraud.
Along with its rivals, EY has come under pressure to invest in its business to strengthen audit processes. It has suffered a series of setbacks including its failure to sound the alarm over a fraud that toppled Wirecard, a company it audited for a decade, and its work on collapsed FTSE 100 medical group NMC Health.
And let’s not forget the £2.2 million fine EY will have to pay the UK’s Financial Reporting Council for botching its audit of bus transportation company Stagecoach. And then this week it was reported that EY is facing litigation in Switzerland from investors of the now-collapsed conglomerate Zeromax:
Zeromax, whose crash in 2010 made it the second-largest bankruptcy in Swiss history, made multimillion-dollar jewellery purchases and made irregular offshore payments – which the big four auditor approved.
EY’s Swiss partnership gave the company clean audits between 2005 to 2007, and continued to audit Zeromax for another three years, but did not disclose audit opinions on the company’s annual accounts, in the run up to its collapse.
In remarks today, EY Global Chairman and CEO Carmine Di Sibio said EY would invest $2.5 billion between 2022 and 2024 in new technology, including in artificial intelligence and machine learning for its audit platform, Canvas, according to FT.
He added the investment would “allow us to do a better audit and a more efficient audit” and improve the group’s chances of detecting fraud. In total, Di Sibio said about $2bn of the three-year investment would “impact audit quality”. …
Di Sibio stressed that EY had strengthened its processes around “client acceptance and client continuance” as a result of the Wirecard scandal. The group now undertook a more rigorous investigation of current and future clients, he said, including scraping social media sites, and was investing in more training for its auditors in fraud detection. About $500m a year will now be spent on staff training.
Speaking of EY’s much-maligned audit and assurance business, it’s still making money despite all the scandals. Of EY’s four main service lines, A&A brought in nearly $13.6 billion in 2021. Here’s how the other service lines performed this year:
Audit and assurance: $13.6 billion (up 5.8%)Consulting: $11.1 billion (up 6.4%)Tax: $10.5 billion (up $7.2%)Strategy and transactions: $4.8 billion (up 14.6%)
EY’s global headcount at the end of June was 312,250, up from 298,965 at the end of June 2020.
EY to spend $2bn on improving audit quality after scandals [Financial Times
EY hit with $1bn claim for one of the largest bankruptcies in Swiss history [City A.M.]
EY Won’t Let a Mere 2.3% Increase In FY 2020 Global Revenue Ruin Its Thursday
EY UK Sheds Some Pounds Because An Audit Partner Messed Up Big Time
Deloitte Is the First Big 4 Firm to Clear $50 Billion In Global Revenue
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