EY pauses global audit and advisory split plan

EY’s plan to split its global audit and advisory businesses has been put on pause amid a dispute over how much of the tax business should remain with the audit company.

Julie Boland, head of EY US and the appointed head of a proposed independent EY audit business, on a Wednesday partner call said the split deal needed to be reworked, company insiders told the Financial Times.

The delay stems from US audit partners fiercely campaigning for a larger portion of the 70,000-strong global tax practice. EY had planned to place the majority of the tax practice in the spun-off consulting company, leaving only about 14% on the audit side, according to company sources.

The US audit partners want over 25%, including more overseas tax practices to enable them to fulfill work for international subsidiaries of major US clients.

EY US accounts for about 40% of the network’s $45 billion global revenue, giving it a strong voice at the internal negotiating table.

The Big Four firm was hoping to put the split to a vote by 13,000 global partners in late April. The April date was already six months later than initially planned, as the company attempts to iron out objections from various stakeholders.

Retired partners previously lodged objections to the split over concerns that it could affect their pensions.

EY’s global leadership decided to pursue the split – dubbed “Project Everest” – in September. Company leaders believe spinning off the consulting arm would free it to pursue contracts with clients that otherwise would be restricted by the company’s audit work – unlocking additional growth.

It is unclear how long the pause on the split plan will be, with one insider saying it could be as short as two weeks.

“As part of our deliberation and due diligence in connection with the proposed transaction, we are engaging in a dialogue with the largest EY country member firms to determine the final shape of the transaction,” EY said in statement.

“This transaction is complex and will be the road map for the reshaping the profession, so it is important we get this right. We remain committed to the strategic rationale that underpins Project Everest and believe that a deal can and should be done.”