EY Israel follows China in shunning global break-up plan

18 December 2022 Consultancy-me.com 3 min. read
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As EY’s global organisation considers separating its audit and advisory brands, partners of two countries have already made it clear which side of the debate they are on. Following in the footsteps of EY’s China office, the Big Four firm’s Israel outpost has also opposed the plans.

Despite denying reports it was planning to split its audit and consulting units into two companies inJuly 2022, in September EY confirmed the firm would indeed be putting the idea to its partnership. As the firm looks to prepare for a potential life after the split, it has even gone as far as to specify who would head up its audit and advisory brands after the ‘divorce’.

However, EY still needs to win over its global partnership if it needs to secure the move. And while it is early days in the canvassing of its 13,000 partners – a process expected to run into 2023 – the firm will have to deal with a number of internal buy-in hurdles.

EY Israel follows China in shunning global break-up plan

As reported by the Financial Times, EY Israel has voted to reject break-up plans currently championed by EY’s global bosses. The move has made Israel EY’s largest national presence outside of China to reject the plans – the latter having also shunned the idea earlier in the month.

EY’s global leaders have pushed its separation of audit and advisory functions as a necessary evil, following rising criticism aimed at their alleged conflicts of interest with regards to the collapses of a number of major clients. With regulatory pressure ramping up, EY’s bosses argued that the change was necessary to ensure both of its key wings could maximise their performance.

However, dissenters have also pointed to concerns that this could leave parts of EY exposed. The consulting business would include the bulk of its advisory, financial advisory and tax division – something some sources suggest could leave its traditional accounting business in a weaker position. This seems to be the thinking behind EY Israel’s position.

After assessing the merits of the break-up proposal, Managing Partner Doron Sharabany told the Financial Times, “From our point of view in the Israel business, the split will not create benefits.”

EY Israel – which boasts around 90 partners and 2,000 staff – will instead retain its advisory business. It is a blow to EY’s global push for change – the Big Four firm had planned for its top 70 to 75 countries to join the split, with the exception of Greater China. It operates in 150 countries, however EY’s global leadership decided applying the break-up to its smallest entities would not be practical.

Even so, EY’s global leadership is planning to press ahead so long as enough of the largest member firms vote in favour. A spokesperson told the Financial Times that it still anticipates “approximately 75 countries will participate in the deal”.

This was echoed by Cornelius Grossmann, leader of EY’s global law practice, who added, said partners in his business were unanimous in wanting to split and free themselves from conflict of interest restrictions that bar working for audit clients.