Is Ernst and Young about to exit Pakistan?

Byline: Farooq Tirmizi and Bilal Hussain

Ernst and Young, the global accounting and professional services firm that goes by its brand name EY, is re-evaluating its relationship with its Pakistani partner Ford Rhodes Sidat Hyder, which includes the possibility that EY will sever its ties with its local partner.

Rumours of this potential change have been swirling in the accounting industry in Pakistan since at least January of this year, Profit has learned through sources familiar with the matter, and have cause alarm among Pakistan's leading accountants and partners at the local affiliates of the global Big Four accounting firms.

According to sources familiar with the matter, the cause of the re-evaluation appears to have been the results of an internal compliance audit of Ford Rhodes Sidat Hyder by Ernst and Young's global offices, a routine practice designed to ensure that the firm offers consistent standards of work to its clients worldwide. That compliance audit found significant deficiencies within the practices of Ford Rhodes Sidat Hyder, and caused the re-evaluation to begin.

Conversations between Ford Rhodes Sidat Hyder and Ernst and Young are ongoing and have not yet reached a definitive agreement or settlement on the matter. Profit reached out to both entities for comment on the matter, but did not receive responses.

It is also unclear as to what precisely what found to be deficient in the practices of Ford Rhodes Sidat Hyder. Insiders at the firm are either unwilling or unable to comment, and partners and other accountants at rival firms also appear in the dark as to what precisely was the problem, except that it appears to have been significant enough for at least one, and possibly more, partners to have been fired from their jobs, an almost unprecedented action in the history Pakistan's Big Four accounting firms.

The unwillingness of anyone to state specifically what the problem was is unsurprising: the Big Four accounting and audit firms rely on their reputation for integrity above all else for business. A loss in confidence would be a devastating blow to the firms.

Whatever the issue, it appears the problem had been festering for some time, and had remained obscured from view from the global partnership in large part owing to Pakistan - and specifically Karachi's - poor security situation, which had meant that the annual compliance audits were typically conducted not by a randomly assigned set of partners from the global firm...