Sunday News Roundup 22.09.11: EY announces split and more Canadian accounting news 

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TORONTO, Sept. 11, 2022 – While the biggest news story of the past week was the passing of Queen Elizabeth, the biggest story in the accounting profession was the organizational split at Big Four accounting firm Ernst and Young LLP. News of the split leaked as long ago as last Sunday, with the Wall Street Journal announcing that EY’s global executive committee, which oversees the firm’s 312,000-person worldwide network and roughly 13,0000 partners, met on Labour Day to put the finishing touches to the plan. 

Then came the official announcement on Thursday that EY would split its accounting and consulting arms into “two distinct, multidisciplinary organisations,” known in the planning documents as AssureCo and NewCo respectively (the opening line says the best odds for a brand name goes to "Parthenon"). To borrow from Walt Whitman, the EY story “contains multitudes,” and we will have more on the split in the months and weeks ahead. But there’s a few aspects of the story worth noting now. 

Despite denials, most observers point to the intensity of regulatory scrutiny, and in particular a $100 million SEC penalty for exam cheating, as the impetus for the biggest shakeup in decades in the accounting profession. EY’s plans were roundly condemned by its Big Four competitors (especially KPMG) but Deloitte (despite its denials) is expected to be the next domino to fall. (As reported this past week, Deloitte almost reached $60 billion in global revenue in 2022.) It wouldn’t be the first time that the Big Four have sold off their consulting arms — some say it happens every time the regulatory scrutiny gets a little too hot. 

China, of course, remains the outlier, according to Reuters. As for EY Canada, the firm says it is still “modeling the split,” and will not say how many of its 477 Canadian partners and 7,000 workers will end up where. One wonders how the audit and assurance side will fare in the future, however, especially with its recruitment of young CPAs, in an already tight labour market. The popular narrative on Reddit (r/accounting) is the boomers are cashing out (with payouts of around $2 million), leaving the younger generation with reduced prospects when and if they finally make partner. 

Accountant elected prime minister … finally!

If you’ve ever believed that nations should be led by accountants, cast your eyes to the UK, where Liz Truss has been elected by the Tories to replace Boris Johnson as Prime Minister. Truss beat rival Rishi Sunak (the former chancellor) and has quickly moved to purge her cabinet of Sunak loyalists. 

Truss is a chartered management accountant who worked for Shell and telecom company Cable & Wireless. (Husband Hugh is a chartered accountant.) She also spent a year in Canada when her mathematician father taught at Simon Fraser University (she attended grade seven at a Burnaby elementary school) and has an affection for Canada. 

It will come as no surprise that she won her party’s leadership race — and became UK prime minister — on a platform of tax cuts but her government’s first major act will be to oversee a massive debt-funded intervention in the energy market to provide relief to UK households. Truss had her traditional audience with the Queen before the monarch died just days later. What a week in the UK. 

Quick Hits: Articles of Interest

Restaurant finds itself in hot water with CRA over servers' electronic tips (Financial Post)
With a few creative tax solutions, Canada could afford to increase its health care spending (Globe and Mail)
N.L. pleads for carbon tax exemption for heating oil, despite 'limited flexibility' (CBC)
Biden's climate plan earns green cred while avoiding Canada-style carbon taxes (National Post)
Canada records April-June budget surplus of C$10.2 bln on higher tax revenues (Reuters)
Quebec election: Liberals, CAQ criticize Québec solidaire's wealth tax proposal (National Observer)
Poilievre's tax plan will help the low-income workers Trudeau let down (National Post) 

By Canadian Accountant staff.