Searching for the meaning of Life.

As the controversy surrounding the Equitable Life collapse rumbles on, Ernst & Young, the assurer’s former auditor, finds itself fighting a defensive action on two fronts.

On the one side a potentially catastrophic civil case with claims totalling more than £1bn against E&Y and on the other a professional disciplinary investigation of the firm by the accountants’ Joint Disciplinary Scheme.

In the wake of numerous US corporate accounting scandals many believed the UK was in danger of becoming complacent. But it has been widely reported that the UK has a much more robust regulatory framework. At the centre of that framework sits the JDS.

Its role is to conduct independent investigations into the work and conduct of chartered accountants in cases of public concern. Though the JDS can work on anything up to a dozen cases at one time its most high-profile current investigation is that of E&Y and its work at Equitable Life.

The JDS gains independence through its funding framework. The ICAEW and ICAS provide annual funds as well as contributions on an ad-hoc basis if a certain investigation warrants it. The Scheme is meticulously thorough in its work and its executive counsel Chris Dickson is testament to this.

A barrister by trade, he was once an assistant director at the Serious Fraud Office before taking the reigns at the JDS.

In the case of the Ernst & Young investigation – which the Big Four firm recently failed to halt in the High Court – the JDS has already been through dozens of boxes of evidence.

Although it has only recently blown up in the press, the investigation began in earnest last year as accountants trawled through evidence from Ernst & Young, Equitable Life, court papers as well as more public sources such as the internet.

The JDS hired accountancy firm Robson Rhodes on a contract basis to provide expert advice on the evidence. The investigation is now entering its final stages, and these will be the most telling.

Though a recent High Court case with E&Y set the JDS investigation back three months, by the time you read this, interviews of E&Y directors should be very close to taking place, if not already under way.

This is where the executive counsel attempts to get involved in every case the JDS investigates and is one of the moments E&Y has worried about most. The investigation will bring its auditors and staff eyeball to eyeball with the JDS executive counsel – an experience that will no doubt prove nerve-wracking

In the High Court, E&Y argued that the interview process would be difficult to carry out due to time constraints and said it would be happy to answer any questions via email.

The judge didn’t agree, however, and said that if the firm could find the time to provide written answers it could also afford the time to allow Dickson to conduct his interviews.

In his first witness statement to the High Court, Dickson said he objected to proceeding by way of written answer because it denied him ‘the opportunity to judge for myself the truthfulness and honesty of the answers by reference to the demeanour of the witnesses.’

But he denied he would use strong-arm court room tactics. ‘It’s a different process to that,’ he says. ‘A barrister is taught never to ask a question to which they don’t know the answer.

‘That’s completely different from the job of investigating a case – which is an information gathering process.’

Once all of the information is gathered, which the JDS hopes to have done by the first half of next year, one of two actions will be taken.

If the body feels E&Y deserves disciplinary action it will pass on the draft complaints and case summary to E&Y.

E&Y will then get 28 days to make any representations against the findings, although this is often extended in complex cases. If, despite the representations, the JDS still feels action is necessary, the summary is passed on to its executive committee with a request to appoint a tribunal.

‘At that stage it is a completely separate procedure,’ says Dickson.

‘The JDS has no part in the process.’ The tribunal will then decide on the nature of the penalty, if indeed it decides to hand one out.

Individual accountants can be subject to an unlimited fine and excluded from the profession. Firms can only be subject to an unlimited fine. The biggest fine yet dished out was for just over £1m in the highly public Maxwell case against Coopers & Lybrand, now part of PricewaterhouseCooper.

It is still unclear what the JDS’s ultimate decision will be, and as yet the executive has refused to be drawn on the subject. What is clear, however, is that no stone will be left unturned by the JDS.

Dickson has been investigating the case for around 12 months already, and there is clearly a feeling he has found enough information in the evidence to justify interviewing those involved.