Link: Equitable special report
E&Y faces a torrid end to the year after being brought to task for providing unqualified audit opinions on the life assurer for 11 consecutive years in what could amount to one of the worst accounting debacles in British history.
E&Y partner, Kevin Paul McNamara, and former partner, Richard George Combes, are at the centre of the complaints.
The Joint Disciplinary Scheme has attacked the firm for signing off the accounts for each of the years from 1990 to 1993 because they were ‘not prepared in accordance with the provisions of the Companies Act 1985 applicable to insurance companies’.
The years 1994 to 2000 ‘did not show a true and fair view’ according to the JDS.
The watchdog has also attacked E&Y for their ‘failure to understand ELAS’s business in relation to, inter alia, bonuses, the reasonable expectations of policyholders, and those ELAS with-profits pension policies which entitled the holder to choose a pension at a guaranteed annuity rate’.
The 11 consecutive years of unqualified audit opinions and E&Ys ‘failure to understand’ the business led the JDS to accuse the Big Four firm of failing to act with the ‘objectivity and independence which is expected from a firm of chartered accountants’.
The complaints bring to a close the JDS’s investigation into the matter, which E&Y tried to stop at the High Court in 2002.
The complaints by the Joint Disciplinary Scheme, will be referred to an independent tribunal, and are likely to be heard before Christmas. The tribunal can invoke an unlimited fine and bar chartered accountants from the profession. The problems at Equitable Life came to a head in 2000 when it lost the infamous House of Lords case over its guaranteed annuity rates. It left the company with a £1.5bn bill and forced it to close to new business.
E&Y said it believes the complaints to be ‘unfounded and misguided’ and will mount a ‘vigorous’ defence.
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