EY looks to face a renewed investigation by Irish regulator
EY looks set to face a renewed investigation by the Irish accountancy regulator into its role as the former auditor of Anglo Irish Bank (AIB), following the conclusion of a lengthy trial of three executives at the bank and another financial institution, who were convicted of a €7.2bn (£6.07bn) accounting fraud involving circular loans.
In 2009 the Chartered Accountants Regulatory Board (CARB) began the initial stages of a disciplinary process involving both EY and the three executives, former AIB finance director William McAteer, AIB executive John Bowe, and Denis Casey, the former group chief executive of Irish Life and Permanent (ILP).
The regulator was asked to park the investigation in 2011 by the Director of Public Prosecutions (DPP) because the issues were before the courts.
Now that the trial, the longest in Irish legal history, has concluded, CARB has said it will seek guidance from the DPP about reopening its own process.
In a statement, the regulator said: ‘CARB remains in contact with the Director of Public Prosecutions following its original request that CARB refrains from taking any action until all cases currently sub judice have been concluded fully.
‘CARB will resume contact with the Director of Public Prosecutions following (Friday’s) events to establish next steps.’
In September 2011 an initial inquiry by special investigator John Purcell, the former comptroller and auditor general, reported to CARB’s complaints committee that in his opinion EY had a ‘prima facie’ case to answer in relation to three issues regarding its auditing of AIB in the run-up to the bank’s collapse during the financial crisis.
These included the firm’s failure to refer to the transactions in September 2008 between ILP and AIB in their audit report on the first set of the bank’s 2008 financial statements, in the absence of appropriate disclosure in those 2008 financial statements; and their failure to ensure appropriate disclosure of a loan made to McAteer.
At the time the process was halted, EY said in a statement: ‘We will vigorously defend our work before a hearing of the Chartered Accountants Regulatory Board’s disciplinary panel, which will consider whether or not any such criticism is justified.’
However a further formal investigation of these transactions by the disciplinary committee was stalled following the DPP’s request while legal proceedings were ongoing.
In the court last week at the conclusion of the trial, which saw all three men handed prison sentences, Judge Martin Nolan questioned how as auditors EY had not known what was going on at the bank, saying: ‘It beggars belief that Ernst & Young signed off on the accounts.’
In a statement in response to these comments, EY pointed out that it was not a party to the proceedings.
‘EY fully cooperated with requests from the prosecution for witnesses and documentation in this matter. Neither the prosecution nor the defence chose to call any EY witness to give evidence at the trial in front of Judge Nolan.
‘We will not be commenting further on this matter due to ongoing proceedings.’ EY said.
Source: CCH Daily
