PracticeConsultingE&Y loses out in US

E&Y loses out in US

Two multinational clients caught up in accounting controversies turn their back on the Big Six firm, switching thousands of pounds' worth of audit work to rival firms. John Stokdyk reports

Ernst & Young’s UK practice has lost thousands of pounds’ worth ofrn their back on the Big Six firm, switching thousands of pounds’ worth of audit work to rival firms. business to rivals KPMG and Deloitte & Touche after the firm lost two US multinational clients embroiled in accounting controversies.

Last week, US software developer Informix wiped $6.2m (#3.8m) from its first-quarter 1998 revenue following E&Y’s advice that sales to other manufacturers should not be recognised until products are sold on to customers. The restatement rippled through to depress the company’s quarterly profits from $4.9m to $1.8m and emerged one week after Informix dropped E&Y for KPMG as its corporate accountant.

Informix chief financial officer Jean-Yves Dexmier said the decision to drop E&Y was not related to the revised quarterly figures. ‘There is no scapegoat and there was no mistake by anyone,’ said Dexmier. ‘It was my decision to restate the figures. We’re ultra-sensitive to image and we didn’t want anyone to claim we were aggressive in our accounting practices.’

The company decided to drop E&Y several months ago, Dexmier said, to make a fresh start with a new firm not associated with a string of shareholder lawsuits that followed its 1996 financial slump. E&Y and Informix were accused of making misrepresentations about the company’s business, earnings growth and ability to achieve profitable growth.

Informix’ UK accounts were prepared in the US, said a spokeswoman, who added that any local accountancy support would be transferred to KPMG.

To add to E&Y’s misery, Connecticut-based conglomerate Cendant last week dismissed E&Y as the accountant for its subsidiary, CUC. Cendant, formed by a merger of CUC and HFS last year, said Deloittes, HFS’ auditor, would take over auditing responsibility for the company’s 1997 financial results, which are being restated following the discovery of irregularities in CUC’s accounts.

E&Y in London said the firm did not discuss its clients.

Additional reporting by Cath Everett, VNU Newswire.

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