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EY’s Varley admits ‘more to do’ in rebuilding audit work

Steve Varley: ‘taking steps’

Steve Varley, chairman of EY, said the firm is prioritising improvements in audit work following a year of searing criticism of the sector’s failures to spot company failures.

He admitted there is “more to do” but was encouraged by recent ratings of its audit work.

“We have continued to prioritise the infrastructure needed to deliver high quality audits by investing in compliance, our people and new technologies,” he said in a statement alongside annual figures.

“While there’s more to do, I’m encouraged by the improvements in our latest audit quality scores from the Financial Reporting Council. The FRC inspections looked at 18 of our audits this year, with 89% of the 9 FTSE 350 audits rated in the top category.

“We audit around 5,000 organisations in the UK and are increasing our focus to ensure that every one of these audits meets the highest standards. I’m confident that we are taking the steps needed to build on these results in the future.

“We are very clear about the crucial role that our work plays in building and sustaining trust and confidence in the capital markets and helping to improve the attractiveness of the UK as a centre for business.”

EY has grown UK revenues by 1.5% and is on course to grow the headcount of its four Scottish offices by 25% in 2020.

EY’s UK fee income grew to £2.45bn in the financial year ending 30 June 2019, increasing from £2.41bn the previous year.

Despite a challenging business environment, revenues in Transaction Advisory Services and Tax grew strongly by 9% and 8% respectively, while Advisory and Assurance revenues declined on previous years by 3% and 5%.

EY’s Scotland managing partner Ally Scott said: “EY’s business in Scotland continues to perform well and has delivered strong results despite ongoing economic uncertainty across the UK marketplace.

“This year, we welcomed Jonathan Boddy as our first equity partner dedicated to our growing Innovation Incentives work in Scotland. We strengthened our regional presence by investing in new office premises in Aberdeen, for move-in next year, and upgraded the Inverness office reinforcing our commitment to our business in the Highlands.

“Through key strategic hires in Scotland, we have strengthened our tax and transaction services teams and have also established a dedicated team to work with our private mid-market clients.

“We mounted a recruitment drive to increase headcount across Scotland by 25% to match our ambitious growth plans and, as part of our continued commitment to diversity and inclusion in our senior leadership team in Scotland, four out of five service lines are now led by women.

“There are many reasons to be optimistic about the future health and growth of our business. While clients face economic and geopolitical uncertainty, our continued priority will be to ensure that we invest in our people, technology and business infrastructure so we are equipped, able and agile to support client needs.”

Earlier this year, EY set new targets to double the proportion of female and Black and Minority Ethnic (BME) Partners in its UK business to 40% female and 20% BME by July 2025, as part of a new strategy to radically accelerate its progress on diversity and inclusiveness.

2019 financial highlights

  • UK fee income growth of 1.5% in the financial year ending 30 June 2019 from £2.41bn to £2.45bn
  • Five year compound annual growth rate of 6%
  • Distributable profits before tax increased from £472m in FY18 to £477m in FY19

·       Total tax contribution for 2019 is more than £927m

·       Average distributable profit per Partner decreased from £693,000 last year to £679,000 in FY19

·       Transaction Advisory Services grew strongly by 9%

·       Tax grew by 8%

·       Advisory and Assurance revenues declined by 3% and 5%.

  • Growth in Financial Services was 0.2%
  • Globally, EY reported annual revenues of US$36.4b for the financial year ended June 2019. This represents an 8.0% increase in revenues in local currency (versus 7.4% in FY18)

2019 non-financial highlights

  • 57 new UK equity Partners: 34% women and 22% BME
  • Hired 2,618 people: 41% women and 22% BME
  • Hired 918 graduates and apprentices: 37% women and 41% BME
  • Invested nearly £31m in learning and development
  • Six of the 10 positions on EY’s UK LLP Board are now held by women.

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