E&Y admits blow to reputation
The reputation of Ernst & Young in the UK could be tarnished after a ban was imposed in the US to prevent the firm from taking on any new public clients for six months, an E&Y spokesman has conceded.
Link: Six-month client ban hits E&Y
The embattled firm was accused by the US financial watchdog of having ‘acted recklessly’ and shown ‘a lack of competence to practice before the Securities and Exchange Commission’ in its dealings with IT supplier PeopleSoft.
E&Y supplied PeopleSoft with its Global Expatriate Management System and various consulting services, until the firm’s consulting arm was sold in May 2000. The firm also audited PeopleSoft’s financial statements between 1994 and 1999.
The SEC ruling concluded that: ‘The overwhelming evidence is that during the relevant period, E&Y’s day-to-day operations were profit-driven and ignored considerations of auditor independence in business relationships with PeopleSoft.’
A statement issued by the firm claimed that ‘the ruling will not have any impact on the UK practice’. A spokesman for the UK firm said there was no ‘material impact’ on the firm, but said that there could be a reputational one. ‘Every development of this kind is a step backwards,’ he said.