UK - Accountancy giant Ernst & Young faces damning criticism for its role in the near-collapse of Equitable Life.
The accountancy profession’s Joint Disciplinary Scheme has laid four separate complaints against E&Y and two of its partners following a three-year investigation into the firm’s conduct as Equitable’s auditor.
E&Y partner Kevin McNamara and retired partner Richard Combes are accused of failing to prepare Equitable’s accounts in accordance with the Companies Act from 1990 to 1993.
And from 1994 to 2000, the JDS claims Equitable’s accounts did not offer a “true and fair view” of its financial position.
And the JDS says E&Y failed to act with the “objectivity and independence” expected from accountants when reviewing a client’s accounts.
Equitable was forced to close to new business in 2000 after the House of Lords said the mutual could not renege on bonus promises made to policyholders - a decision which left it with a £1.5bn bill.
As a result, the JDS has accused E&Y of “failure to understand Equitable Life Assurance Society’s business in relation to, inter alia, bonuses, the reasonable expectations of policyholders, and those ELAS with-profits pension policies which entitled the holder to choose a pension at a guaranteed annuity rate”.
The JDS will submit its findings to an independent tribunal for consideration. If the tribunal agrees with the conclusions, E&Y, Combes and McNamara could face unlimited fines and the two partners may receive life bans from the profession.
An E&Y spokesman said: “We believe the complaints are unfounded and misguided and we will be mounting a vigorous defence.”
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