Eventful summer for E&Y and KPMG
Potential collapse of two Big Four firms this summer gives profession pause for thought
This morning’s expected decision by Equitable to drop a £700m claim against
Ernst & Young – combined with KPMG’s $456m (£255m) ‘settlement’ with the US
Department of Justice over helping clients avoid billions in tax – has seen the
potential collapse of two Big Four firms averted.
The summer of 2005 has been an eventful period for E&Y and KPMG, with
both firms racking up millions of pounds in costs, legal advice and, in KPMG’s
case, a massive fine at the hands of the DoJ.
Thankfully for those involved, both cases have concluded in the accountants’
favour. The firms will escape with only reputations tarnished at KPMG – and jail
time likely for a handful of key individuals – and a comparatively small legal
bill of about £20m in costs for E&Y.
However, the fact that both cases have been dragging on for such a long time
and both firms have had to put their reputations on the line, has reopened
arguments about what would happen should the Big Four become a Big Three – or
even Two.