THE US ACCOUNTING watchdog has fined Ernst & Young $2m (£1.26m) and reprimanded four partners for audit errors related to Medicis Pharmaceutical.
The accounting regulator Public Company Accounting Oversight Board (PCAOB), issued its largest ever fine to E&Y for failing to fully evaluate three annual audits of financial statements at the pharmaceutical business.
"These audit partners and Ernst & Young - the company's outside auditor for more than 20 years - failed to fulfill their bedrock responsibility," said James Doty, PCAOB chairman (pictured).
"The auditor's job is to exercise professional skepticism in evaluating a public company's accounting and in conducting its audit to ensure that investors receive reliable information, which did not happen in this case."
The PCAOB inspection unit checked the audits relating to statements for 2005, 2006 and 2007. The unit found the firm and partners "failed to properly evaluate a material component of the company's financial statement".
E&Y and its responsible partners were also found to have failed to take appropriate action following an internal inspection and "failed to sufficiently audit key assumptions and placed undue reliance on management's representation that those assumptions were reasonable".
Lead audit partner in 2005 and 2006 Jeffrey Anderson, was restricted from "associating" with any PCAOB-registered firm, with a right to petition in two years, and handed down a $50,000 penalty.
Another audit partner to feel PCAOB's wrath includes Robert Thibault, he was barred from associating with a registered firm, with a right to petition after one year, and given a $25,000 fine.
E&Y partner Ronald Butler, who was a second partner supervised by Anderson in 2005, was dished out a $25,000 fine.
The firm and partners, who restated Medicis accounts to the Securities and Exchange Commission, agreed to settle without admitting or denying the findings.
A statement from Ernst & Young US said: "Ernst & Young cooperated fully with the PCAOB in its investigation of this matter.This settlement allows us to put this matter behind us.
"We have implemented changes to our policies and procedures that directly address the PCAOB's concerns and will enhance quality in the future.
"We take these issues very seriously, and remain highly confident in the quality of our audits."
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