Rise in revenue
EY boosts audit team ‘to help build trust’
Hywel Ball: ongoing investments
Big four accountant EY has posted a 5% growth in UK revenue in a year which saw it hire 3,000 staff including 700 to help improve the performance of its audit team.
This follows intense scrutiny of the profession following a number of audits of high profile firms that subsequently collapsed.
EY has launched a redesigned audit quality strategy which includes a continued focus on developing a culture of professional scepticism, management support of audit partners, further investments in data-driven audit processes, and additional training for its teams.
Investments in audit quality have contributed to a number of audit wins for EY which currently audits 24 companies in the FTSE 100 and 72 in the FTSE 350.
Chairman Hywel Ball said: “Audit quality continues to be a priority for EY and we are making significant ongoing investments.
“Audit is fundamental to building trust and confidence in business and the capital markets, but even more so during a time of significant disruption and uncertainty.”
He said the firm “continued to work closely with our regulator on proposals for audit reform and have submitted plans for the operational separation of our audit practice.
“We recognise that change is needed to restore confidence in our profession, and we believe the steps we are taking are a clear signal of our willingness to do so.
“Operational separation is an important stepping-stone towards a reformed audit, corporate governance and corporate reporting ecosystem.
“However, these proposals alone will not deliver all the changes needed. A holistic package of reforms, including improved director accountability and changes to the scope of audit, is required to deliver effective and sustainable change.”
EY appointed 65 equity partners between 1 July 2019 to 3 October 2020, of whom 26% are women and 19% are from an ethnic minority.
Improved recruitment and pay for ethnic minorities is on the agenda with a target for 15% of its ethnic minority partners to be black.
A third (30%) of the work experience places on the EY Foundation’s Smart Futures/Our Futures programmes will be offered to black young people for the next five years from September 2021.
The firm’s median gender pay gap has improved to 15.3% from 20.1% last year “but there is still more to do”. The median black pay gap is 21.4% and ethnicity pay gap has actually widened from 13.9% to 15.8%.
UK fee income grew to £2.6bn in the financial year ending 3 July, from £2.5bn the previous year. Revenues in Strategy and Transactions grew 9.4%, Tax grew 8.1% and Assurance grew 7.8%. Growth in EY’s UK Consulting practice declined on previous years by 4.7%.
Average distributable profit per partner decreased from £679,000 in FY19 to £667,000 in FY20. In addition, 10% of distributable partner profits were retained due to COVID-19 uncertainty.
As of 3 October EY’s UK partnership stands at 23% female and 12% ethnic minority (3% are black partners) while 64% of positions on EY’s UK board are held by women.
Investment in Scotland
EY has 33 partners in Scotland of which 13 (39%) are female. Graduate and apprentice recruitment rose 10% from 88 to 97. Of these, 41% are female and 22% from ethnic minorities.
Ally Scott, EY UK&I managing partner for Scotland, said: “Our new partners will bring valuable insights to our clients across the market, from entrepreneurial and mid-market private businesses to the largest listed and multi-national corporates based in Scotland.”