The unscalable mountain

Reflections on EY's failed split

Photo by Sven Piper on Unsplash

This substack will typically focus on the big issues, things like geopolitics, climate change and public policy - things I am passionate about. However, sometimes there are world events that I have direct knowledge and experience with that merit their own post.

This is one of those times.

As someone who spent 10 years working at a Big Four accounting firm, in both the audit and advisory groups, you might be thinking that I have thoughts on the recent announcement that Ernst & Young’s (EY) proposed split (internally termed Project Everest) of its audit and advisory practices is no longer going ahead.

You would be right!

Background

In case you have never interacted with a Big Four accounting firm, or don’t even know they exist, a bit of background. Four global accounting firms dominate the public accounting profession. To put their dominance into context:

• As of June 2022 the Big Four audited 88% of the SEC’s large accelerated filers, defined as public companies with a worldwide market cap of over $700m¹,

• Between 2019 and 2021, only Amazon hired more recent college graduates than each of the Big Four, showcasing their size, prestige and depth of talent, and

Source: CPA Practice Advisor

• In 2022, their gross U.S. revenue ranged from $27.9bn (Deloitte) to $11.4bn (KPMG). RSM was next with $3.6bn.

As these statistics demonstrate, in terms of the clients serviced, the talent looking to enter the industry and revenue generated, the Big Four has a stranglehold on the market.