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, England.[4] It was ranked by Forbes magazine as the eighth-largest private company in the United States in 2011.[5]

Early history

EY offices in Warsaw

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 largest accountancy 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.

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 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.[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]

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 networks which 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.

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.

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]

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]

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." [27]

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]

Sons of Gwalia
On 4 September 2009, EY, the former auditors of Sons of Gwalia, agreed to a $125m settlement over their role in the gold miners 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]

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]

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 105and 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, Lehmans 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]

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 itcease and desist from violating securities laws. Six partners were also sanctioned by the commission and barred from auditing public companies. [44]

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 Czanne, Picasso, Bonnard, Monet, Rodinand 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]

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.

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

Assurance Tax Advisory

Consulting Financial Advisory Other

Revenue

US$ 24.4 billion (2012)[3]

Employees

152,000 (2012)

Divisions

Assurance, Advisory, Tax, Transactions

Website

EY.com