Ernst & Young Europe’s transformation makes partners worry about Wirecard damage

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The accounting group Ernst & Young will concentrate its powers in a new European executive team, pooling resources across the region, but is worried about any financial blow from Europe Line card scandal Can also be shared.

According to people familiar with the matter, the reform broke the joint business model of the four major companies, tried to reduce management costs by half, and authorized the central team to determine the remuneration of partners.

Some partners worry that the new structure may result in penalties related to Wirecard because it is shared outside the German team that handles the work.Ernst & Young Audit Payment Group Ten years, until it went bankrupt in last year’s fraud scandal.

“The French partners were furious about this because they said,’Why are we paying for Wirecard’s mess now?’,” said a person close to the company.

Another person familiar with the matter said that there is “not much transparency” as to whether any financial losses caused by Wirecard-related litigation or regulatory actions will ultimately be shared by partners in other countries.

However, a person from Ernst & Young who was involved in the creation of the new structure stated that this concern was “unfounded”, adding that each country would retain a separate legal entity. The Big Four have traditionally used separate partnerships in each country in which they operate to prevent liability from spreading to their global business.

Ernst & Young announced in February that it would create a new Western Europe region, but did not provide detailed information on the impact. The regional group includes 27,000 employees and US$4.7 billion in annual revenue. It will include Germany, France, the Netherlands, Italy, Spain and 20 other Western European and North African countries, and is scheduled to start on July 1. It does not include the United Kingdom, Ireland or Scandinavia.

Industry executives stated that Ernst & Young and its three major competitors-Deloitte, KPMG and PricewaterhouseCoopers-are hindered by traditional business models, in which profits and resources are mainly concentrated in national member companies or small Within the sub-region.

According to Ernst & Young’s plan, business lines such as consulting and merger advice will be included in a single income statement. The extent of audit and tax consolidation is limited by regulations.

Integration will go further than existing payments between regions, which reflect the transfer of work by partners in one country to another. Currently, partners in each country also contribute a small portion of their income to fund shared international investments, such as technology and international executive salaries.

People familiar with the matter said that European management will determine the remuneration of partners in each country, but will have some consultations with local management. Partners in countries with higher profits may continue to retain a higher share of profits.

A person close to Prudential Partners said it was a “strange time” to link German operations with those in other countries.

The Big Four law firms are facing avalanche litigation in Germany and have lost many well-known law firms Customer review The largest economies in Europe include Deutsche Telekom and Commerzbank.

The Ernst & Young reorganization is part of the “NextWave” strategy that began before Wirecard’s collapse, and aims to cut costs and improve customer service by reducing “silo behavior” and allowing teams from different countries to work seamlessly together. The plan says.

The integration and sharing of international personnel is particularly important in consulting.

“This is a problem that all these companies have been trying to crack,” said a former global executive from another Big Four company. “In a sense, this is the Holy Grail… If they can deliver, then it’s better for the customer, which is a competitive advantage.”

Those involved in the plan said that the new western European sub-region will replace three smaller sub-regions, aiming to reduce management costs by half.

Ernst & Young declined to comment.

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