More NewsE&Y partner joined client-company as director

E&Y partner joined client-company as director

AIU report finds partner move "not consistent" with ethical principles

An Ernst & Young (E&Y) partner was earmarked for the directorship of
a client-company while also providing independent advice about its IPO.

The situation is one of a number of issues identified in the annual Audit
Inspection Unit (AIU) report into the firm.

According to the report, a transaction advisory services partner, who was due

to retire from the firm, acted as a prospective director of an client which
undertook an IPO.

Ethical standards prohibit a partner from accepting an appointment to the
board of
directors of a client. E&Y, however, found no breach of the standards
because the appointment took place after the partner retired. He was formally
appointed one day after leaving E&Y.

Prior to the IPO, E&Y restricted the partner’s role and appointed two
independent executives, to combat the perception the partner was not
independent.

However, the AIU found the situation was not in line with ethical principles.

“In our view the partner’s role with the audit client was not consistent with
the underlying principles of the ethical standards,” the body said in its
report.

“We do not believe that the application of safeguards was capable of
addressing the threats arising to the firm’s independence as auditors.”

The issue was one of a number identified in the AIU’s report. Poor record
keeping relating to going-concern assessments; inadequate evidence of the
competence, experience and objectivity of external experts; and even
typographical errors were highlighted by the AIU.

Overall, the AIU found the firm placed considerable emphasis on its quality
control systems and has appropriate policies and procedures in place for its
size.

E&Y said the reports was “not intended to provide a balanced scorecard”,
but said the report was fair.

In a statement a spokeswoman said E&Y placed considerable emphasis on
audit quality and on continually improving its high standard of service.

“We welcome and support the independent oversight of the audit profession as
an important driver of audit quality and investor confidence,” she said.

“This year’s report reflects some of the significant investment our business
has made in the provision of audit services. “

Further Reading:

Financial Reporting
Council

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