Wikipedia: Ernst & Young

Ernst & Young (EY)

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 (2011)
Divisions	Assurance, Advisory, Tax, Transactions
Website	EY.com

Ernst & Young (EY) is one of the largest professional service firms in the world and one of the "Big Four" accounting 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 8th largest private company in the United States in 2011.^[5]

Contents   [hide]  1 History 1.1 Early history 1.2 Mergers 1.3 Recent history 2 Global structure 3 Services 4 Name and branding 5 Staff 6 Criticisms 6.1 Equitable life 6.2 Anglo Irish Bank 6.3 Sons of Gwalia 6.4 Akai Holdings 6.5 Lehman Brothers 6.6 Bally Total Fitness 7 Sponsorship 7.1 Sports sponsorship 8 Notable current and former employees 8.1 Business 8.2 Politics and public service 8.3 Other 9 See also 10 References 11 External links

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.^[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 largestaccountancy 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.

[edit]Mergers

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 andCoopers & 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 1990s. 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]

Recent history

In 2002, EY took over 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 2010, EY acquired Terco, the Brazilian member firm of Grant Thornton.^[13]

[edit]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.^[14] This is different from other professional services networkswhich are more centrally managed.

The four areas are:

• 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. The aim of this structure is to effectively cater for an increasingly global clientele, who have multinational interests.

[edit]Services

EY has four main service lines and share of revenues in 2011:^[15]

• Assurance Services (46%): comprises Financial Audit (core assurance), Financial Accounting Advisory Services, Fraud Investigation & Dispute Services, and Climate Change & Sustainability Services.
• Tax Services (26%): includes Business Tax Compliance, Human Capital, Customs, Indirect Tax, International Tax Services, Tax Accounting & Risk Advisory Services, Transaction Tax.
• Advisory Services (19%): consisting of four subservice lines: Actuarial, IT Risk and Assurance, Risk, and Performance Improvement.
• Transaction Advisory Services (TAS) (9%): deals with companies' capital agenda – preserving, optimizing, investing and raising capital.

[edit]Name and branding

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]

[edit]Staff

Ernst & Young was ranked No. 1 in the Forbes Magazine's The Best Accounting Firms to Work For in 2012, claiming that EY treats its employees better than other big firms.^[17]

The firm was ranked No. 1 in BusinessWeek's annual list of Best Places To Launch a Career for 2008.^[18]

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.^[19]

Ernst & Young was ranked 4th in Universum's America's Ideal Employers list 2011^[20] and 3rd in its Global Top Employers list.^[21]

The firm was No. 34 in ComputerWorld's 100 Best Places To Work For In IT for 2009.^[22]

The firm was also placed among the top 50 places in the Where Women Want to Work awards for 2007.^[23]

The firm was named as one of the 10 Best Companies for Working Mothers by Working Mothers magazine in 2006.^[24]

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.^[25]

In early 2012, it was reported that Ernst & Young has 10,000 staff in mainland China and Hong Kong, which has quadrupled in a decade. It has about 11,200 staff in the UK.^[26]

[edit]Criticisms

[edit]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."^[27]

[edit]Anglo Irish Bank

In January 2009, in the Anglo Irish Bank hidden loans controversy, EY was criticised by politicians^[28] 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.^[29][30]. The Irish 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"^[31] and into the performance of its auditors, EY.^[32][33]. EY said it “fundamentally disagrees” with the decision to initiate a formal disciplinary process." and that "there has been no adverse finding made against Ernst & Young in respect of the audit of Anglo Irish Bank." ^[34]

[edit]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.^[35]

[edit]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.^[36]

[edit]Lehman Brothers

The Valukas Report by bankruptcy court examiner, Anton R. Valukas, issued on 11 March 2010,^[37] charged that Lehman Brothersengaged 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^[38] that they have sued the firm for fraud charges related to repo 105 and the collapse of Lehman Brothers. The firm said that its last audit of Lehman Brothers was for the fiscal year ending 30 November 2007 and that, Lehman’s financial statements were fairly presented in accordance with Generally Accepted Accounting Principles (GAAP).^[39][40][41]

In 2010 EY, in a letter to the firm's key clients, defended its audit work for Lehman Brothers.^[42] In June 2012 the Accountancy & Actuarial Discipline Board concluded that no action should be taken against Ernst & Young or any individuals in connection with the auditing of the Wall Street firm before it collapsed in September 2008. ^[43]

[edit]Bally Total Fitness

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 partners were also sanctioned by the commission and barred from auditing public companies. ^[44]

[edit]Sponsorship

Ernst & Young's publicity activity includes its worldwide Entrepreneur of the Year program, run in 50 countries.^[45]

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.^[46]

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.^[47]

EY sponsors the ITEM club.^[48]

[edit]Sports sponsorship

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.^[49]

[edit]Notable current and former employees

[edit]Business

• Arthur Blank—co-founder of Home Depot, owner of the Atlanta Falcons
• Jim Balsillie—co-CEO of Research In Motion (1992–2012)
• Andrew Gould—Chairman and former CEO of Schlumberger (2003–2011)^[50]
• Ed Grier—Dean of VCU School of Business, Former President of the Disneyland Resort (2009–present)
• Chris Kubasik—CEO of Lockheed Martin (2001–present)
• Sean Wise—venture capital commentator
• Patricia A. Woertz—CEO of Archer Daniels Midland (2006–present)
• Michael T. Strianese—CEO of L-3 Communications (2006–present)
• Karan Bilimoria, Baron Bilimoria—Founder of Cobra Beer

[edit]Politics and public service

• Jan Peter Balkenende—Prime Minister of the Netherlands (2002–2010)^[51]
• John B. T. Campbell III—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—Former Auditor General of Canada (2001–2011)
• 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)
• Tin Pei Ling-Member of Parliament for Marine Parade GRC, Singapore (2011–present)

[edit]Other

• Kimberly Clarice Aiken – Miss America 1994
• Geneviève 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

EY offices in Warsaw

EY offices in New York

EY office in London, at More London Place near Tower Bridge

EY offices in Sydney

EY offices in Detroit

EY offices in Berlin

EY offices in Munich

EY offices in Toronto

EY offices in Lima, Peru

EY office in Melbourne

See also

• Accounting networks and associations
• Professional services networks

References

1. ^ "Facts & Figures". Ey.com. 30 June 2011. Retrieved 8 December 2011.
2. ^ Ernst & Young: Jim Turley. Ey Retrieved on 9 July 2011.
3. ^ "Doing Business". Doingbusiness.ro. Retrieved 8 December 2011.
4. ^ Facts and figures. Retrieved 3 January 2011.
5. ^ "America's Largest Private Companies". Forbes. 3 November 2011. Retrieved 3 February 2012.
6. ^ ^{a b c d e f} Ernst & Young – History. Ey Retrieved on 9 July 2011.
7. ^ Reports say Arthur Young and Ernst may merge New York Times, May 1989
8. ^ Accountancy merger off. BBC News (1998-02-13). Retrieved on 9 July 2011.
9. ^ Cap Gemini to acquire Ernst & Young consulting business New York Times, March 2000
10. ^ Ernst & Young acquires Anderson India. Findarticles (2003-04-08). Retrieved on 9 July 2011.
11. ^ Maintaining a Diverse Culture. EY. Retrieved on 9 July 2011.
12. ^ Mitchell & Titus Joins Ernst & Young Global as a Member Firm. Prnewswire Retrieved on 9 July 2011.
13. ^ Grant Thornton confirms departure of Brazilian member firm Grant Thornton, 3 August 2010
14. ^ Ernst & Young consolidates global structure. Webcpa Retrieved on 9 July 2011.
15. ^ Facts and figures. EY Global Review. Retrieved on 4 February 2012.
16. ^ Ernst & Young Website. Ey Retrieved on 9 July 2011.
17. ^ The Best Accounting Firms to Work For Forbes. Retrieved on April 27, 2012
18. ^ BusinessWeek: The Best Places to Launch a Career. BusinessWeek. Retrieved on 9 July 2011.
19. ^ Ernst & Young LLP named to FORTUNE’s “100 Best Companies to Work For” list for the 12th year in a row. Ey (2010-01-21). Retrieved on 9 July 2011.
20. ^ America's Ideal Employers 2011 Universum
21. ^ The World's Most Attractive Employers 2010 Universum
22. ^ 100 Best Places To Work For In IT. ComputerWorld (2008-06-26). Retrieved on 9 July 2011.
23. ^ Where women want to work. The Times. Retrieved on 9 July 2011.
24. ^ Working Mother
25. ^ George Chen (16 April 2009). "Ernst & Young China staff to take low-pay leave". Reuters.
26. ^ China headcount to overtake UK at top firms by Adam Jones (Jan 25, 2012) Financial Times
27. ^ BBC News (2005). Equitable drops High Court action. Retrieved 26 August 2006.
28. ^ Where were the auditors?. Shane-ross.ie (2009-01-12). Retrieved on 9 July 2011.
29. ^ The Cost of Anglo-Irish Bank. Irishtimes (2010-08-12). Retrieved on 9 July 2011.
30. ^ Anglo's board and auditors criticised at egm Shareholders told Kyle Swartzlander owed bank a total of €129m in 2007. Irishtimes (2009-01-01). Retrieved on 9 July 2011.
31. ^ Drumm resigns as chief executive of Anglo Irish. Irishtimes (2008-12-12). Retrieved on 9 July 2011.
32. ^ "Press Release Further appointments for Purcell". Chartered Accountants Regulatory Board. 25 March 2009.
33. ^ "Accountancy watchdog seeks to widen inquiry into Anglo Irish". 26 March 2009. Retrieved 1 March 2010.
34. ^ [1]| E&Y faces probe on Anglo Irish Bank audit|(2011-09-14)
35. ^ Ernst &Young agrees to $125m Sons of Gwalia settlement The West Australian, published: 4 September 2009, accessed: 4 September 2009
36. ^ "Ernst & Youngs US$200m snag". South China Morning Post (Hong Kong). 12 October 2009. Retrieved 12 October 2009.
37. ^ Lehman Directors did not breach duties examiner finds. Dealbook.blogs.nytimes (2010-03-11). Retrieved on 9 July 2011.
38. ^ Attorney General Cuomo sues Ernst & Young for assisting Lehman Brothers in financial fraud, State of New York, Office of the Attorney General, Media Center, 21 December 2010
39. ^ Lehman Cooked Books before Collapse, Report Finds. Cbsnews (2010-03-12). Retrieved on 9 July 2011.
40. ^ Court-Appointed Lehman Examiner Unveils Report. Dealbook.blogs.nytimes (2010-03-11). Retrieved on 9 July 2011.
41. ^ Lehman smoking gun leaves E&Y facing questions. Accountancyage Retrieved on 9 July 2011.
42. ^ Ernst & Young defends its Lehman work in letter to clients. accountingweb. Retrieved on May 30, 2012.
43. ^ [2] The Guardian. Retrieved on July 12, 2012.
44. ^ Norris, Floyd (18 December 2009). "Ernst to Pay the S.E.C. $8.5 million". The New York Times. Retrieved 21 April 2011.
45. ^ Ernst & Young Entrepreneur of the Year Awards. Ey Retrieved on 9 July 2011.
46. ^ Maharaja: the Splendour of India's Royal Courts. Vam.ac.uk (2009-07-20). Retrieved on 9 July 2011.
47. ^ Cyberchase – PBS Kids Official PBS Kids Website with corporate sponsorships.
48. ^ Ernst & Young Item Club appoints new Chief Economist. Prnewswire.co.uk (1997-06-16). Retrieved on 9 July 2011.
49. ^ "Rio 2016 Unveils Ernst & Young as Tier 2 Sponsor". Aroundtherings.com. Retrieved 8 December 2011.
50. ^ "Schlumberger CEO to retire, remains as chairman". Forbes. Retrieved 1 August 2011.
51. ^ (Dutch) Former Dutch PM to be partner in accountancy firm

External links

• Ernst & Young global website
• Ernst & Young – Company Information