“Sell while you can – You are not for all markets”
Rosalind to Phebe, “As You Like It” (III,v,60)
Summer holidays are ended, schools are re-opened, the seasons turn. And the waiting continues, with no end in sight, since the news in May of EY CEO Carmine Di Sibio’s plan to separate the global network’s consulting and audit practices into NewCo and AssureCo.
Project Everest’s mountain-top remains shrouded, and Di Sibio has not descended. The timetable is reported to slip through the autumn, and the list becomes longer of issues that could de-rail the project.
“Waiting” is a culturally familiar device. Interests are focused, and tensions build. In movie Westerns the anxious town-folk wait for John Wayne and the cavalry. Theatre-goers wait for Samuel Beckett’s eponymous Godot. Investors salivate for monthly government statistics. Cult devotees await saviors or, perhaps, an apocalypse.
In mid-August I drew contrasts between the structure and organization of EY and history’s benchmark, the 2001 IPO of Accenture, newly liberated after its divorce from Arthur Andersen’s audit practice –- views that, still hostage to fortune at this writing, will eventually be tested.
This supplement looks further at some of the questions beneath the masses of numbers generated by the hordes of banker/advisors feeding at the trough of the EY project. Reactions to the relevant uncertainties will have multiple impacts: on the entire sector including EY’s competitors around the globe, and –- centrally –- for the EY partners’ career-defining decisions as they assess their professional goals and options.
For EY partners considering a future with a NewCo consulting firm:
Without the anchor of a legacy audit practice, what are the real prospects for NewCo and the mélange of country-scale consulting practices that last year gathered in some $ 25 billion in revenue? To compete for both work and personnel, NewCo would confront not only the other Big Three and their commitment to continued full-service practices, but also the broad-service consultancies with long and well-established global brands and market presence –- Accenture itself at 2021 revenue of $ 44.5 billion, and the deep pockets of Bain, BCG, and McKinsey -– reportedly offering compensation packages for new MBAs in the US approaching $ 250,000.
For consulting partners on the fence and able to choose between the two:
Considering the fluid and evolving state of the global regulators’ views on the provision of ancillary services to audit clients, is there a preferred choice between jumping to NewCo with its uncertain future, or opting for AssureCo, where client development and service expansion may be constrained in a practice focused on that legacy firm’s book of audit clients?
To illustrate the depth of this question -- the SEC’s March 2022 proposed rule-making on greenhouse gas reporting and assurance, mired as it is in critical comments and political wrangling, still makes clear the agency’s view that the intended assurance would fall within the permissible scope of the statutory auditors. Well and good, except a sourcing question for EY: would it be an appealing career path, for a GHG expert, to accept a practice confined to the portion of the annual audits of AssureCo’s US registered clients, against the opportunities to work across the entire sector?
For audit partners who might choose a future home in AssureCo:
- How would the audit-oriented practice of AssureCo either employ or engage the diverse scope of expertise necessary to carry out the complex audits of global-scale clients?
-
- These skills extend to valuation, financial instruments, sustainability of all kinds –- where practitioners may for the sake of their own career ambitions be unwilling to confine themselves within the limits of independent statutory audit.
-
- Would an independent GHG expert consider it an appealing engagement to support an AssureCo audit, if obliged to demonstrate SEC-level independence and therefore be forced to foreswear sustainability consulting for that company, whether GHG or otherwise?
- How would AssureCo’s limitations in practice scope respond to the market’s evolving needs for broadened and more complex forms of assurance?
- How would it compete not only with the other Big Three firms, which remain committed to multi-disciplinary practice models, but with the new providers eager to expand especially into the world of Sustainability reporting and assurance?
In addition to the already-mooted issues of liability exposure, pension funding, and retention of experienced staff, these questions are of sleepless-night importance for the EY partners, wherever their current location in the EY global structure.
For them, the wait must seem endless.
Thanks for joining this dialog. Please share with friends and colleagues. Comments are invited and welcome, and subscription sign-up is easy and free – both on the Main page.