The EY Accounting Group aims to concentrate power in a new European executive team, pooling resources across the region but raising concerns of any financial hit from Wirecard scandal It can also be shared.
The sweeping reform breaches the federal business model for the Big Four in an effort to cut management costs in half and will mandate the central team to decide on partners’ salaries, according to people briefed on the plan.
Some partners fear that the new structure could lead to penalties related to Wirecard’s participation outside of the German team that took over the business. EY He audited batch payments For a decade until I collapsed in a scam scandal last year.
A close associate of the company said: “The French partners are turning towards it because they say, ‘Why are we paying now for the Wirecard mess? “.
Another person close to the issue said that “there wasn’t a lot of transparency” about whether any financial harm from the lawsuits related to Wirecard or the regulatory action would end up being shared by partners in other countries.
However, an EY person involved in creating the new structure said such concerns were “unfounded,” adding that separate legal entities would be kept in each country. The Big Four traditionally shields from the spread of responsibility across their global business by using separate partnerships in each country in which they operate.
EY announced in February that it would create a new region in Western Europe, without providing details on the implications. The regional pool, with 27,000 employees and $ 4.7 billion in annual revenue, will include Germany, France, the Netherlands, Italy, Spain and 20 other Western European and North African countries and is scheduled to launch on July 1. UK, Ireland or Scandinavia.
Industry executives said that EY and its three main competitors – Deloitte, KPMG and PwC – have held them back by their traditional business model where profits and resources are largely restricted within national member firms or small sub-regions.
Under the EY plan, business lines such as advisory and merger and acquisition advice will run in a single income statement. The regulations define the extent to which auditing and taxes can be combined.
Integration will go far beyond existing payments between regions, which reflect work referred by partners in one country to another. Currently, partners in each country also contribute a small percentage of the revenue to fund joint international investments such as technology and international executives’ salaries.
People familiar with the plans said that the European administration will decide the salaries of the partners in each country, although there will be some consultation with the local administration. Partners in more profitable countries are likely to continue to hold a higher share of profits.
A person close to wary partners said it was a “strange time” to align German operations with those in other countries.
The Big Four is facing a series of lawsuits in Germany and has lost a number of prestigious cases Customer audit In Europe’s largest economy, including Deutsche Telekom and Commerzbank.
The EY restructuring, which is part of the “NextWave” strategy that began before the collapse of Wirecard, aims to reduce costs and improve customer service by reducing “isolated behavior” and allowing teams in different countries to operate smoothly, and people familiar with the plan said.
International integration and sharing of employees is of particular importance in consulting.
“It’s the thing all of these companies are trying to break through,” said a former global executive at another Big Four Firm. “It’s the Holy Grail in a way … if they’re able to offer it, it’s better for customers and it’s a competitive advantage.”
The planner said the new western European subregion would replace three smaller sub-regions, with the goal of cutting administration costs in half.
EY declined to comment.