Cleaning up the UK audit sector: debarment of Ernst & Young from public contracts

Although in the UK the Big Four more broadly has been criticised for audit failures in recent years EY in particular has been at the heart of a number of high-profile corporate fraud and money laundering scandals.

The UK High Court ruled in April this year that EY should pay $10.8m in compensation to Amjad Rihan, who had previously worked for the firm as an auditor in Dubai. EY ignored his concerns of a client’s suspected money laundering and smuggling of gold and instead sought to hide his findings from the authorities. Mr. Rihan was later forced to flee Dubai and described the High Court’s judgement as “total vindication” after he was “cruelly and harshly punished for insisting on doing my job ethically”.

The Financial Reporting Council is currently undertaking an investigation into EY for its audits into NMC Health plc as well as London Capital and Finance plc. The two firms are accused of committing serious fraud offences and later collapsed.

EY is also facing investigation across Europe for major audit failures. The Danish Disciplinary Board is investigating the accountancy firm for failing to report money laundering at Danske Bank, who handled over €200 billion in suspicious cash transactions without EY flagging any concern.

Germany is investigating EY’s role in the Wirecard scandal, where according to reports, EY auditors relied on screenshots and documents provided by a third-party trustee and Wirecard employees instead of requesting the information from the banks handling Wirecard’s accounts.

EY has been hit by €24 million worth of regulatory fines for violation of audit, conflict of interest and competition rules in Spain, Netherlands and Italy.

The accountancy firm is also facing multiple investor suits worth over €1 billion for its auditing failures in the NMC and Wirecard cases. Read further on www.spotlightcorruption.org.