Jamil Khatri, Co-Founder and CEO of Consulting Firm Uniqus Consultech Inc. Former KPMG India Chief Auditor
There are many factors in this split, but at the most basic level it addresses conflicts of interest. Its successful implementation could prompt regulators to encourage other large multidisciplinary companies to follow suit.
Given the large global partnerships involved and potentially different regulatory frameworks in different countries, this split may face operational complexities. Therefore, operational challenges cannot be underestimated, but they are also not insurmountable.
A partner of one of the big four auditing firms who requested anonymity
This is a bold move for EY and a step in the right direction. This eliminates conflicts of interest between audited and non-audited services. This separation means that both consulting and audit partners can approach clients independently without restrictions. Overall, this is likely to improve the quality of audits and we have not seen any significant business impact.
Conversely, both auditing and consulting businesses are likely to grow as restrictions are lifted.
However, there are some pain pockets, which always arise with large-scale restructuring issues.As far as India is concerned, the biggest challenge will be related to the availability of professional services by audit firms. Even for a pure audit firm, these expert services are required, so it will be interesting to see how EY divides up services such as tax, IT and valuation. Other challenges can arise when building a separate IT infrastructure that is currently largely shared. By both auditing and consulting businesses.
Globally, management will have more accountability and responsibility if the consulting business does end up going public, as it has to be held accountable to public shareholders, as proposed. increase. Also, in a market like the US, pension issues need to be considered. It is important to see how audit partners in these regions are exposed.
As far as other big companies are concerned about whether to go this route, it could be driven by global regulators the UK or the US. Companies are expected to monitor how EY itself transitions. But it is too early to say that everyone will take this path of structural collapse.
Ashok Haldia, Former Secretary, Institute of Chartered Accountants of India
While the EY split addresses potential conflicts of interest, it alone cannot improve audit quality. This requires constant reform by audit firms.
They must continue to align with the changing regulatory environment, market and stakeholder expectations. For these reasons, other large companies may choose to split auditing and non-auditing services.
Shriram Subramanian, founder and MD of proxy advisory firm InGovern Research
The EY split is good news from an investor perspective and a positive development for the audit market. This ensures that auditors do not compete. If one company is on this path now, other big companies may follow suit.
Shailesh Haribhakti, Veteran Auditor and Chairman of Shailesh Haribhakti and Associates
A company split is absolutely necessary. I totally agree with that. It eliminates conflicts of interest and makes way for pure audit firms. Integrated reporting is also gaining momentum, raising awareness across audits and bringing a renaissance to the auditing world.
Vishesh Chandiok, CEO of Grant Thornton Bharat
The split of EY basically means that global brands are dead in India forever. Remember that for Audit, Global Brand is not available in India and Global Non-Audit will be a new brand. It’s a huge loss of value and I don’t know how our Indian partners will be compensated.
Many teams and clients of such companies especially Indian corporate/middle market companies offer the opportunity to find new homes in other multidisciplinary firms. None exist. So I’d like to see how this changes this time.
I don’t think Grant Thornton will go down this path of splitting the main pieces in any major country. At the same time, I think at least he’ll have one, maybe he’ll have two big companies to follow.
Amarjit Chopra, former ICAI Pres, NFRA non-executive member
A welcome move, provided that the real test of this lies in doing the same thing in spirit, not in letter.
This split will free up non-audit practices and allow us to accept missions without regulatory restrictions. Audit work is ring-fenced against potential conflicts of interest in accepting audit assignments. But splitting may not be as easy as it seems. It makes sense.
In India, professionals are eager to join the Big 4 with the aim of taking advantage of switching from one field to another. Even in India, the Big 4 earn much more from non-audited services than audited. Compensation levels for auditing professionals at the Big 4 are far superior to those of other companies. At first glance, the split appears likely to impact audit partner compensation, technology investment for audits, and audit quality.