We knew it was coming, but this week's news from the Joint Disciplinary Scheme (JDS) regarding Ernst & Young's audit of Equitable Life will have made the profession wince with pain all the same.
Just as accountants began to believe that their reputations might be lifted out of the gutter, the JDS announced at the weekend that it would lay complaints against the firm and two partners, Kevin McNamara and Richard Combes, for their treatment of the Equitable accounts from 1990 to 2000.
In brief, the JDS alleges that audits conducted during that period either failed to spot that the accounts were not prepared according to the Companies Act, or did not see that they did not offer a true and fair view.
The charges are withering and could hardly be worse for a Big Four firm in the current climate.
The question, though, is what kind of position will the profession be in should these complaints be upheld?
Oddly, it’s difficult to say that it would be any worse than the fallout from Enron and WorldCom. Equitable has been such a long running story – and will continue to run for some time – and much of the public has long since got bored and tuned out. The ruling on Equitable will come and go, E&Y will probably survive (though millions out of pocket should they decide to settle claims out of court), and the corporate world will continue.
However, the mood among E&Y clients, and corporates in general, is likely to be more wary than it ever was, and the whole dismal episode has made it more difficult to see when confidence will return.
Questions will no doubt also arise for regulators. They will be left feeling uneasy that 10 years of accounts at Equitable could be misread by the auditors. They will be asking whether current rules and recent regulations could deal with issues such as Equitable’s. The introspection that has taken place since Enron, it’s fair to say, will continue for some time to come.
And what of an audit cap? How easy would it be to tell the public that auditors are to receive more legal protection should a JDS tribunal rule against E&Y?
Is it any wonder that the Treasury has gone cold on a cap and that the Big Four were this week expecting disappointment from the government?
Clearly, the healing process for audit firms has some time to go and the Equitable debacle has only served to make a sore wound fester for longer.