Ernst and Young LLP is currently working to improve the quality of its audits after the collapse of its clients Wirecard and FTSE 100 Medical Group, amid other scandals. EY has announced that it will be investing around $2 billion over the next three years to achieve this goal.
EY’s accounting firm revealed that the $2 billion would be part of a $10 billion investment plan that focuses on increasing the value of its audits through staff training, new technology, and improving its fraud detection capabilities.
Carmine Di Sibio, Chief Executive of EY, stated that the funds would be invested in technology such as artificial intelligence and machine learning between 2022 and 2024. These new additions will increase the value of Canvas, EY’s audit platform. EY generally invests around $1.8 billion to $2 billion each year after paying partners and staff.
Sibio emphasized that EY’s plan would expand its audit quality, stating the investment would “allow us to do a better audit and a more efficient audit.”
EY is facing pressure to invest in its business after scandals including a fine of £2.2 million ($4.1 billion) by the Financial Reporting Council and an issuance of a severe reprimand for failing to audit Stagecoach, a London-listed transport company.
The COVID-19 pandemic has allowed the company to save on costs and drove a 4% increase in global revenue to $40 billion as demand increased.
Within the last financial year, EY was able to grow its assurance division by 2.5% in revenue terms. Tax and consulting divisions increased by 3.9% and 3.5%, respectively.
Sibio states that EY had strengthened its “client acceptance and client continuance” process after the Wirecard scandal. Now, more investigations—including the scraping of social media sites—are carried out in order to properly vet current and future clients.
EY is amongst others in the industry facing criticism. The Financial Reporting Council determined that 29% of a sample of 103 audits required improvement or significant improvement.