Ernst & Young is one of the Big Four auditors.

History

The firm as we know it today is the result of a series of mergers of ancestor organizations. The oldest originating company was founded in 1849 in England as Harding & Pullein. In that year the company was joined by the American Frederick Whinney. He was made a partner in 1859 and with his sons in the business it was renamed Whinney, Smith & Whinney in 1894. In 1903, the firm of Ernst & Ernst was established in Cleveland by Alwin and Theodore Ernst and in 1906 Arthur Young & Company was set up in Chicago.

In 1965, Whinney, Smith & Whinney merged with Brown, Fleming & Murray to form a accounting and consultancy firm named Whinney Murray. Whinney, Smith & Whinney had been closely allied with Ernst & Ernst since the 1940s, and in 1979 Whinney Murray, Ernst & Ernst, and Turquands Barton Mayhew joined together as Ernst & Whinney, creating the fourth largest accountancy firm in the world. In 1989, the number four merged with the then number five, Arthur Young, to create Ernst & Young.

The partnership built up its consultancy arm heavily during the 1980s and 90s. The SEC and other members of the investment community began to raise increasing concerns about potential conflicts of interest between the consulting and auditing work. Ernst & Young was the first of the Big Five Auditors to formally and fully separate its systems integration and auditing practices. In May 2000, the consulting arm was sold to the French IT services company Cap Gemini for $11 billion in cash and stock, creating the new consulting firm of Cap Gemini Ernst & Young, which was later renamed Capgemini.

Ernst & Young is the auditor for a number of major corporations, including AOL Time Warner, Wal-Mart, Amazon.com, Oracle, Intel, Hewlett-Packard, Coca-Cola, and Verizon.

Equitable Life legal case

In April 2004, Ernst & Young became formally involved in legal action pursued by Equitable Life, the UK life assurance company which nearly collapsed following a House of Lords judgement that it had to pay in full guaranteed annuities held by its policyholders. This caused enormous difficulty because of a large gap existing between the value of the company's assets, and the value of its customers' pension policies, reaching £4.4bn .

Equitable Life claimed that Ernst & Young neglected its duty as auditor by signing off unrepresentative accounts, as is consequently demanding £2bn in compensation. Ernst & Young argued that:

"Nothing that Ernst & Young did caused Equitable’s problems. There is nothing more we could have told them that they did not already know. There was no black hole, no fraud and no money lost" ^{Where Equitable Life went wrong. Retrieved 17 April 2005.}

1. ^ Ernst & Young (2005). Ernst & Young says Equitable pouring Policyholders money down the drain. Retrieved 17 April, 2005.

External links

• Ernst & Young homepage
• Capgemini homepage