EY Created Facebook’s Tax Plan. And Lo, It Was Good, Declared EY

Facebook is having an argument with the Internal Revenue Service, which the social media giant says could cost it as much as $5 billion. The dispute involves a tax strategy designed by EY, formerly Ernst & Young, that helped Facebook slash billions from its U.S. tax bill since 2010. Part of Facebook’s defense is that the plan was fully reviewed by its outside auditors. The accounting firm that signed off on EY’s tax plan? EY.

Over the past four years, Facebook paid EY almost $23 million for auditing, plus $21 million for tax planning and other non-audit work. It’s not an uncommon arrangement: More than 100 U.S. companies have hired their auditors to also advise them on tax planning, including the tax implications of mergers, moving intellectual property to offshore subsidiaries, or corporate inversions (deals that move a company’s headquarters overseas). According to a Bloomberg analysis of data from U.S. Securities and Exchange Commission filings compiled by Audit Analytics, these services for audit clients generated more than $613 million in billings for the Big Four accounting firms from 2012 through 2015. About 10 percent of the fees that accounting firms make from audit clients are for non-audit work.