Disciplinary Action Awaits Ernst & Young Over Anglo Irish Bank Failures
Big Four accounting firm Ernst & Young will be finally facing a disciplinary action from an accounting regulator after months of temporary delay on the hearing of issues involving the audits of Anglo Irish Bank.
According to the Chartered Accounts Regulatory Board (CARB)’s the special investigator John Purcell, Ernst & Young will have to answer three cases regarding Anglo’s 2008 annual accounts.
On April this year, a high court in Ireland reserved the decision on Ernst & Young’s plea to trash the investigation being aimed against it in connection with the loan misappropriation in Anglo Irish Bank.
Purcell said there is evidence pointing to Ernst & Young’s failure to detect the scale of the loans by Anglo to its then-chairman Seán FitzPatrick, and how those loans had been ‘systematically’ refinanced during the end of each year.
Purcell said these loans should have been disclosed in the first set of Anglo’s financial statements published in December 2008.
He added that Ernst & Young failed to adequately report the circular transactions between Anglo and Irish Life & Permanent – which saw each bank lend billions to the other to project a nicer picture of each bank’s loan book.
Accordingly, the auditors also failed to adequately disclose a loan made to William McAteer, a director of the company, in the 2008 financial statements.
CARB’s disciplinary panel is now looking into the cases.
However, Ernst & Young maintained that Purcell’s findings were only preliminary and did not constitute an adverse finding against the accounting firm.
“We will vigorously defend our work before a hearing of the Chartered Accountants Regulatory Board’s Disciplinary Panel which will consider whether or not any such criticism is justified,” it said in a press statement.
The company added that it was up to Anglo and its directors, under Irish law, to ensure that financial statements were prepared in accordance with the relevant legal standards, insisting that its role was only to audit those statements.
“Any audit depends to a substantial degree upon the openness, honesty and transparency of the management of the company being audited,” the statement said.
According to Ernst & Young, the Office of the Director of Corporate Enforcement is investigating Anglo Irish Bank’s former management in relation to the “suspected withholding of information from auditors.”