PracticeAuditFarepak loans ‘nothing to do with audit’

Farepak loans 'nothing to do with audit'

Ernst & Young set to play down role in Farepak by saying loans could not have affected its audit opinion

Questions were being asked this week about the demise of
Farepak, focussing on a
series of loans made by the company.

Speculation about the demise of the Christmas hamper group this week focused
on loans made by the company to its parent, audited by Ernst &Young. There
are questions as to whether the loans meant that money from savers was being
used to pay off the group’s bank debts.

E&Y is set to defend itself by saying that the existence of inter-group
loans makes no difference to an audit opinion, since the loans made no material
difference to the group as a whole.

DTI investigators are looking broadly into the demise of Farepak after
hundreds of thousands of savers lost Christmas savings.

In a statement, E&Y said that it had not signed off an audit for 2006,
and that the most recent accounts it had looked at were the year to 30 April
2005: ‘At the time of the signing of our audit report on the accounts for the
financial year ended 30 April 2005 we could not have predicted the chain of
events that led to the suspension of the shares of EHR in late August 2006. We
stand by the judgments that we made when we signed our audit report.’

Further reading:

BDO and DTI to investigate
Farepak collapse

Equitable case flawed from
start to finish

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