Saturday 3 December 2016

Ernst & Young 'should have known' about massive scam

Published 30/07/2016 | 02:30

EY is currently being sued by the liquidators of the renamed IBRC over alleged failures in its role as Anglo Irish Bank’s auditor (Stock picture)
EY is currently being sued by the liquidators of the renamed IBRC over alleged failures in its role as Anglo Irish Bank’s auditor (Stock picture)

Anglo Irish Bank's former auditor Ernst & Young (EY) won't face any new legal consequences despite sharp criticism by Judge Martin Nolan yesterday for its failure to spot a €7.2bn fraud at Anglo Irish Bank, the Irish Independent understands.

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EY was the former Anglo Irish Banks external auditor in 2008,when the €7.2bn fraud occurred, responsible for signing off on its published accounts.

In hard-hitting language Judge Nolan questioned how as Anglo's auditors EY had not known what was going on.

"It beggars belief that Ernst & Young signed off on the accounts," he said.

"How they signed off on the accounts as true and fair is a mystery to me."

The judge added: "They should have known what was occurring if they were if they were doing their job properly."

Judge Nolan said the court hadn't had the benefit of evidence from EY, but to him the signing off of the accounts "seems incomprehensible".

In a brief press statement, EY said none of its staff had been called to give evidence before the judge.

"EY was not a party to these 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," a spokeswoman said.

EY is currently being sued by the liquidators of the renamed IBRC over alleged failures in its role as Anglo Irish Bank's auditor.

However, the case taken by IBRC liquidators Kieran Wallace and Eamonn Richardson relates specifically to EY's alleged failure to uncover alleged "improper" loan transactions and does not cover the €7.2bn fraud involving money flowing between Anglo Irish Bank and Irish Life & Permanent.

The Irish Independent has learned that, in 2009, IBRC's legal advisers reviewed EY's role in relation to those IL&P transactions and found the auditors had no case to answer.

Regardless of Judge Nolan's comments yesterday, that decision cannot be reversed because of a legal statute blocking any case being taken more than six years after an alleged incident has occurred. EY's role as auditors of Anglo Irish Bank has been controversial since the extent of problems at the bank first became clear.

In 2011, accounting standards agency the Chartered Accountants Regulatory Board (CARB) referred findings on EY's audits of Anglo Irish Bank to a disciplinary panel following an initial inquiry by special investigator John Purcell.

However, no findings were made against EY. Last year a report commissioned by CARB in effect exonerated all firms, including EY, that had audited the banks before the crash.

"The report has found that the audit work was satisfactory, with the audit firms generally complying with the relevant contemporary international auditing standards, but that a number of improvements needed to be made by the firms concerned to clearly demonstrate the challenges and scepticism applied in reaching their conclusions," CARB said.

Irish Independent

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