Pricewaterhouse Coopers and Ernst& Young Being Investigated Over Client Asset Rules
The AADB (the Accountancy and Actuarial Discipline Board) is investigating Pricewaterhouse Coopers and Ernst & Young over their compliance of client asset rules. Compliance is a requirement of the Financial Services Authority.
The AADB said that it had begun its investigations into the workings of Pricewaterhouse Coopers, who are the auditors of JP Morgan Securities. The investigation will look into the audit firm’s role in reporting to the FSA on JP Morgan’s compliance with the client asset rules of the FSA.
The FSA rules protect client money and require audit firms to keep separate their client money from their own by giving trust status.
Earlier this year, JP Morgan was asked to pay a fine of a record £33.3 million when it was revealed that the bank had mixed up client money with that of its own money during a 7 year period. Due to the fiasco, up to £16 billion of JP’s clients’ money went inside wrong bank accounts.
In the case against Ernst & Young which the AADB is pursuing, the auditor’s conduct in regards to Lehman Brothers International (Europe) is being investigated. Particularly, whether the audit firm complied with the rules of client assets is to be investigated into.
The FSA ha made a scathing report last week on the discovery of a serious number of failings upon review. The announcement of investigations to be conducted on two of the Big 4 firms comes after that.
Richard Sutcliffe, who is the FSA’s client assets sector leader, said that FSA had “repeatedly emphasized the importance of firms segregating client money and assets effectively”.
Sutcliffe also said that it was ultimately the responsibility of audit firms to ensure that they had the right system in place.