The ambitious plan could see the Pakistan operations changing structure By Ahtasam Ahmad
D
uring the last week of May, news broke out about Ernst & Young’s (EY) plan to carve out its consultancy business into a separate Public listed Company. The ambitious plan of the Big Four accounting firm comes after sustained global criticism regarding independence of auditors being marred due to the conflict of interest arising between audit and consultancy services. If the plan is implemented, besides obvious repercussions on global services, Pakistan in particular would be impacted, say experts. “Reputed Audit practices, especially the Big four, give credibility to almost all companies in different sectors. What I have witnessed over the last decade is that foreign investors and multinationals are inclined towards these global practices because of their reputation. Deloitte leaving Pakistan was a big blow, simply because of the fact that there is one less company in the country that foreign investors can trust on,” said Muhammad Hava-
AUDITING
ris Arshad, a Senior Chartered Accountant and Audit Manager at PwC Pakistan. Multinational firms tend to prefer having a single audit firm that can audit their operations around the world, which is why accounting firms tend to be the most global organisations of professional services providers. Moreover, the credibility they add to a country’s corporate sector and the transfer of global technical expertise they bring to the local markets is invaluable. This impact would further be augmented by the fact that EY has two operations in Pakistan, the legacy partnership firm EY Ford Rhodes Sidat Hyder & Co and the Middle East operated EY Rapid Innovation Private Limited. Moreover, the industry is staff intensive with more than 3,000 white collar professionals being employed by the country’s Big Four (Now Big Three) firms alone. Majority of this staff is in audit practices given its laborious nature. The payscale amongst the permanent staff in these firms varies according to designation. In EY, for instance, the supervisory staff is paid between Rs60K to Rs100K while the
managerial staff is paid between Rs150K to Rs350K based on their experience. The salaries in the consulting functions are 10-20% higher compared to the audit practices. Pakistan, after the exit of Deloitte in 2020, is the second-largest economy after heavily-sanctioned Iran to not have all Big Four accounting firms. The next largest economy to not have all Big Four is Ethiopia, which is about one-third the size of the Pakistani economy. There are economies in other parts of the world that are one-hundredth the size of Pakistan that still have all of the Big Four firms supporting their corporate sector. Therefore, decisions impacting EY Pakistan hold immense importance for not only the existing clients of the firm but also the overall corporate environment and the investment climate of the country.
The Split
T
he proposal for restructuring is a strategic move by the accounting firm to liberate its consultancy business from regulatory require-
9
