SEC censures E&Y over accounting work for US bank
Ernst & Young to pay £814,800 in settlement after SEC probe
The US Securities and Exchange Commission has ordered Ernst & Young to
pay $1.6m (£814,890) to settle charges of compromising its independence and
contributing to faulty accounting by a client in 2001.
As part of the
settlement,
the firm has neither denied nor admitted allegations made by the SEC relating to
work it did for Pittsburgh-based regional bank PNC Financial Services Group.
E&Y publicly admitted the SEC was investigating work done for PNC in late
2004. At the time, the agency probed a product that the firm created for PNC at
the request of the bank’s insurer American International Group Inc.
The SEC said that the financing vehicle allowed PNC to move $762m (£388m)
worth of bad loans and investment off its balance sheet in 2001.
In its order this week, the
SEC
alleged that the firm failed to conduct an independent review of PNC’s
accounting, separate from the accounting firm’s advice to AIG when it was
helping to develop the product.
As a result of the faulty accounting for transactions, PNC was forced to
restate nearly $155m (£78.9m) in earnings.
Further reading:
Ernst
& Young censured by U.S. regulator
Ernst
& Young to Pay $1.6 Million to Settle SEC Charges