E&Y: Steve Varley and audit rebels

ERNST & YOUNG managing partner Steve Varley has been much more vocal than normal – perhaps it’s because the firm has posted its best top line numbers in many years.

Of course we don’t know how much profit the firm has made, although E&Y has admitted that the ‘average’ profit-per-partner figure is down a bit on the previous year.

But outside of the headline numbers presented in the firm’s press release, there are a few more details lurking in its newly revealed transparency report that are of interest to the profession – auditors in particular.

E&Y’s assurance arm grew 8% to £478m for the year ending 29 June 2012. The firm grew its overall revenues by 11% to more than £1.6bn.

But statutory audit fees earned were pretty static at £318m, from £311m in 2011 – an increase of a couple of percent.

Fees for assurance services from non-audit clients rose to £139m from £112m, a 24% hike.

As Varley said: “We continue to win in the UK audit market and have had some very significant new clients choose us this year … We have had some losses too, but this just demonstrates that we live in a highly competitive market.”

So what does this mean?

For E&Y, it suggests that they’ve had to work hard to maintain audit revenues.

In one way at least, E&Y’s success in the non-audit space is worrying for the BDOs and GTs of this world. Picking up non-audit appointments among major listed companies is a big deal for firms five and six, as the work itself is lucrative and also helps give them a footing for picking up audit clients of the future.

But in a world where the audit market’s operation is under such scrutiny, some would argue that E&Y’s efforts to maintain revenues show the market is working effectively. BDO and GT might argue differently.