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Monday Morning Accounting News Brief: EY Split Gets Ripped Apart; Advisory Slowdown is Here; KPMG Snubs Promotions | 3.6.23

sleeping dog with glasses on

Good morning and happy Monday! Things were a bit quiet last week as much of the profession currently has their heads down grinding through the best time of the year, this week will likely be much of the same. BDO layoffs were the significant story from last week and may signal the start of a culling of the advisory herd system-wide. Let’s not worry about that for now. Deloitte Australia isn’t.

Deloitte projects annual revenue growth of 15pc [Australian Financial Review]

Deloitte chief executive Adam Powick says the firm is on track to grow revenue by about 15 per cent this financial year, as client demand holds up for IT consulting work.

“We did see a slowdown around August and September, but that was to a strong 15 per cent [revenue growth] from 20 per cent,” he said.

“We’ve still got more than 1000 open roles, and we’re taking on more than 1300 graduates, our largest ever intake.”

The big four CEO said the firm’s leaders acted quickly when they noticed clients tapping on the brakes late last year by pulling back on hiring consultants.

The drop, caused by concern over a possible recession as interest rates increased, happened as staff turnover also fell to 20 per cent from a high of 30 per cent at the end of 2021. Deloitte has no plans to cut staff, in contrast to rival KPMG, which is eliminating about 200 roles.

And in the UK, KPMG auditors got an email from the boss:

No mid-year promotions for KPMG audit staff [The Times]

KPMG has cancelled the now-regular round of mid-year promotions for its thousands of auditors.

An email sent to the group’s UK audit teams, seen by The Times, confirmed that “following a thorough review of workforce planning there will be no mid-year promotions” in 2023.

Historically KPMG would promote people in April “by exception only”, but in recent years it has promoted more staff in the spring than it usually would. In the email sent this week Catherine Burnet, KPMG’s head of audit in the UK, said that this had been “based on business need”.

She added, however, that KPMG’s staff turnover had normalised: “Across the firm we have seen our attrition levels stabilise and our year-end headcount is expected to be higher in comparison to the prior year.”

Friendly reminder: YOU AREN’T CHARGING ENOUGH.

Some fun comments on this Financial Times long read on the EY split:

To split or not to split: EY confronts the question [Financial Times]

EY’s top bosses believe partners understand the rationale for the deal: splitting the businesses would liberate both from conflict-of-interest regulations that prevent them advising companies for which they also act as auditor.

But falling company valuations have changed the landscape since Everest became public in May 2022 and some partners remain unconvinced that the break-up devised by Di Sibio is the best path.

“The strategic rationale of what we’re doing, our partners understand,” says Andy Baldwin, EY’s global managing partner for client service. Their question, he adds, “is not ‘should we do something?’ I think that train’s left the station.”

“Most partners, if you ask them at the moment, they’re going to be for [the split], with a ‘but’,” says Hywel Ball, EY chair in the UK, where a 75 per cent supermajority is needed for approval. “And the ‘but’ is they need to see the detail.”

Two of the 73 comments:

“like selling off the family silver”

“Current separation model is beneficial to senior partners who are nearly retirement age as they would rip [sic] all the benefits and would retire shortly but for younger partners there are no benefits at all.”
Bonus third comment and reply:

In China, they’re talking about making a hub for top-tier accounting training:

Gong Yongde, a member of the Chinese People’s Political Consultative Conference (CPPCC), said the Greater Bay Area, a vast economic zone encompassing Hong Kong, Macau and nine cities in Guangdong province, should set up the institutes to pool information.

“If most mainland enterprises choose to set up ‘going global’ headquarters in the Greater Bay Area, a large amount of overseas information and practical experience will be gathered in the area,” the state-run National Business Daily quoted Gong as saying on Friday.

“The interconnection of information and experience will help the enterprises avoid detours and reduce the risks in overseas investment.”
Gong, who is also the former vice-president of KPMG China, said many companies that failed to expand and invest overseas did so because they did not have enough research-based information.

Gong suggested China strengthen professional training of high-end accounting personnel and set up an international accounting institute in the Greater Bay Area for Chinese businesses expanding offshore.

A few other things:

That’s all I’ve got for now. Meet me back here next Monday and there will be more headlines that may or may not be interesting. Have a great week!