In its interim report on the affair, the committee, chaired by Giles Radice MP, said it did not believe the arrangements were ‘adequate’ and called upon the Financial Services Authority to look into the matter.
The report said: ‘We do not believe that the auditing arrangements for the statutory accounts and, in particular, the regulatory returns of life offices were adequate.’
It concluded: ‘We ask the FSA to consider the justification for the auditors’ judgements and whether there are implications for future reporting practices by auditors generally.’
The committee noted the directors of Equitable Life had responsibility for drawing up the statutory accounts while Ernst and Young, as auditor, was responsible for forming an independent opinion of Equitable Life’s statutory accounts.
In addition, E&Y was responsible for determining that the statutory accounts gave a ‘true and fair’ view of the company’s finances, and were free from ‘material misstatements’.
But the committee complained only specific parts of the regulatory return were subject to an independent assessment and that E&Y’s audit only covered 28 out of the 420 pages of Equitable?s 1999 regulatory return.
In particular, the audit did not cover the estimates of the reserves required to cover the insurer’s guaranteed annuity rate liabilities.
A spokesman for E&Y, who yesterday stood down as Equitable’s auditors said the firm was considering the conclusions of the report.
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