“We are in the early stages of this evaluation, and no decisions have been made.”

The EY plan, which has been in the works for months and would involve spinning out the auditing division into a separate company, was first reported by Michael West Media.

The firms are facing increasing regulatory scrutiny in Europe, the UK, the US and Australia over their increasingly sprawling operations.

The firm’s operations in Europe and China have been badly hurt by its work on two troubled audit clients, Wirecard and Luckin Coffee.

Wirecard, a German payment processor, filed for insolvency in 2020 after admitting that €1.9 billion ($3 billion) of cash on its books probably never existed, while Luckin Coffee filed for bankruptcy this month after allegations the company’s executives inflated income, costs and expenses for 2019.

The UK accounting regular, the Financial Reporting Council, has already ordered the firms to structurally separate their auditing operation by mid-2024, while the Wall Street Journal has reported the US securities regulator, the Securities and Exchange Commission, is conducting a probe into conflict-of-interest concerns about the audit and consulting arms of the big four.

In Australia, corporate regulator has repeatedly complained about the big four compromising their “appearance of independence” by providing non-audit work for audit clients and about the quality of corporate auditing in the country.

The Australian Securities and Investments Commission’s most recent quality inspection reports found that one in five audits reviewed by the big four lacked the desired assurance that company financial statements were free from material error.

EY had by far the best results of the major auditing firms with ASIC finding the firm did not do enough work on 7 per cent of the key areas of work it did on audits of risk-targeted companies in the 2020-21 financial year. This is down from 14 per cent for 2019-20 and 22 per cent for the 2018-19 financial year.

In contrast, the range of findings ranged from 25 per cent for PwC through to 29 per cent for Deloitte and KPMG.

EY is legally structured as a network of independent national firms which pay to use the common brand and systems. The firm employs about 312,000 staff across more than 150 countries.

Comment has been sought from EY.