Now E&Y and PwC face lawsuits.
In a fresh blow to the auditing profession, Equitable Life is to sue its former auditor Ernst & Young, a move that could cost the Big Five firm £2.6bn.
The lawsuit, which follows a report compiled by lawyers Herbert Smith last November, alleges negligence in the firm’s audit of the insurer when it ran into trouble after losing a legal battle over ‘guaranteed annuity rates’.
The life insurer said: ‘The Society’s former auditors Ernst & Young have not provided a substantive reply (to the Herbert Smith report). We have therefore started legal proceedings against them.’
But the firm has always maintained its audit was robust.
It said: ‘For the record, we told Herbert Smith that they had not provided us with sufficient information for us to provide a ‘substantive reply’.
It said it would be reviewing the details of the claim.
Separately, PricwaterhouseCoopers in Russia is to face legal action by a minority shareholder in the giant state gas provider Gazprom for whom the firm was auditor.
Mounted by the Hermitage Capital Management Fund, the lawsuits reflected a belief that PwC presented audit reports that allegedly ‘contradicted the facts’.
Hermitage has also filed a demand with the Russian Ministry of Finance that PwC’s licence to audit be suspended.
Such a move would see a major upheaval in the Russian accountancy market where the Andersen office recently chose to merge with Ernst & Young following the Enron scandal in the US.
Richard Buski, PwC Russia managing partner, said: ‘We have not yet seen the claims filed against PwC but the allegations in the Hermitage Fund press material are completely unfounded. Our work met all applicable legal and professional standards and we shall be defending the claims vigorously.’