Accounting giant EY has said that standards must improve in the audit sector and welcomed an investigation by the Competition and Markets Authority into the scrutinised sector, as it reported increased UK revenue today.
EY’s fee income, equivalent to revenue, grew 2.7 per cent to £2.41bn for the financial year ending June.
EY’s partners will profit from the company’s fortunes, with a £16,000 pay rise to an average of £693,000 this year.
Profits before tax increased 1.7 per cent to £472m in 2018, while the company paid £900m to the UK taxman.
EY’s global revenues increased 11 per cent in US dollars to $34.8bn (£27.1bn).
Why it’s interesting
The audit sector faces increasing scrutiny from regulators, and calls to break up the so-called Big Four auditors, of which EY is one, are intensifying, after the CMA decided to probe the quartet's domination of audit following the collapse of Carillion.
EY’s call to improve standards “across the profession”, was accompanied by a statement that the company had not been fined by the Financial Reporting Council (FRC) for audit work finished in the last five years.
"EY recognises the need to continue to invest significantly in its business and people to improve audit quality and is committed to doing that," the company said.
"While standards need to improve across the profession, it is important to note that EY has not been fined by the FRC for audit work completed in the last five years, nor have any of its partners been sanctioned in respect to that period."
The company said it will continue to invest in technology, pumping a further $1bn into its technological capabilities over the next two years.
This year EY launched a machine learning tool to help improve clients' working capital. The company also introduced Insurwave, the world’s first marine insurance blockchain platform, in May.
EY said it was working to increase diversity in its workplaces, with 43 per cent of its new recruits being women, and a third coming from black and minority ethnic backgrounds.
Its tax services segment rose by 7.3 per cent, advisory by 3.8 per cent, transaction advisory was up 1.5 per cent, and its audit division climbed four per cent, while assurance dropped 1.7 per cent.
What EY said
UK chairman Steve Varley said: “We remain focused on the quality of our audit work and we also welcome the recently announced market study by the CMA. This study, together with Sir John Kingman’s review and the FRC’s work on corporate reporting, presents a golden opportunity to examine the role of audit and to reinforce the focus of auditors and company directors on audit quality.
“We were disappointed that our latest audit inspection results from the FRC declined from last year. 82 per cent of our FTSE 350 audits required ‘no more than limited improvements’ compared to 92 per cent in 2017– based on the FRC’s categories for audit quality. Encouragingly, the regulator said there were improvements in all of the areas it identified the previous year.
“We will continue our investment in even better technology and training for our people and further strengthened our long term audit quality programme which started in 2014 to challenge and guide our teams."