E&Y reforms to improve reputation

Link: E&Y accused of undermining Sarbanes-Oxley

The Big Four firm in the past months received criticism about its controversial tax work for former executives of Sprint and about its audits at hospital organisation HealthSouth, which is now correcting 15 years of its books.

In addition, the Securities & Exchange Commission last week started an investigation into a complaint from US consumer organisations that the firm is by-passing the new Sarbanes-Oxley Act. In a separate case the SEC recently asked a judge to ban the firm from taking new clients for six months.

To restore confidence, E&Y is now taking a series of internal steps to improve its performance. It has increased the number of technical staff, which will increase auditor independence by enforcing headquarter adjudicates to regional branches. It has further restricting the type of work it will perform, abandoning disputed areas such as tax-shelter advice.

The firm has also launched a project dubbed ‘client reacceptance’, which tests clients on future problems. A US E&Y spokeswoman said the project had so far resulted in the firm walking away from 200 private and public clients representing up to $100m (£60m) in fees, the Financial Times reported.

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