BusinessCorporate FinanceE&Y hit with £300k negligence claim

E&Y hit with £300k negligence claim

Ernst & Young is facing a £300,000 legal battle after being accused of professional negligence by a procurement group

EuroSourceLine, which provides supplies to car parts maker AervinMeritor,
accuses the firm of breach of contract and negligence, and is demanding damages.

In a writ lodged at the High Court, the company says it discovered
‘anomalies’ in its accounts for 2002 and 2003, and had to call in auditors
Friend to provide revised accounts.

The alleged errors include stock cut-off errors totalling £319,535, which had
not been identified, cash at the bank being understated by £612,917, and
creditors understated by £529,840. Turnover was overstated by £197,448, and the
cost of sales overstated by £172,689, according to a High Court writ.

The firm produced incorrect figures for profit and a profit of £70,281 was
shown as transferred to reserves, but the true position was a loss of £236,571,
the writ says.

EuroSourceLine says Ernst & Young inappropriately addressed some
disclosure and presentational matters and a significant number of bank
reconciliation and posting errors were shown in records, which would have
impacted on its profit and loss account and closing balance sheet.

EuroSourceLine says the problems cost the company more than £74,000 in time
and expenses and £157,460 for the work of Friend. It also claims that its credit
rating was impaired and HBOS reduced its borrowings and increased charges. It
was forced to find alternative funding, which cost an extra £47,185.

E&Y said: ‘This claim is without merit and we will be contesting it
vigorously.’

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