Ernst & Young to face disciplinary hearing over role in Anglo collapse

TOP accountancy and auditing firm Ernst & Young is facing a disciplinary hearing at an industry watchdog over claims it failed to identify rogue operations at Anglo Irish Bank.

The company must address three key deals in the bank’s 2008 accounts, including a €7.45 billion overnight deposit from Irish Life & Permanent and €87 million in loans held by disgraced ex-chairman Sean FitzPatrick. Special investigator John Purcell has also ordered Ernst & Young to explain why it did not ensure disclosure of a loan to former Anglo director Willie McAteer.

In a statement, the firm said: “This is a preliminary stage of the process and, for the avoidance of doubt, there has been no adverse finding made against Ernst & Young in respect of the audit of Anglo Irish Bank. We will vigorously defend our work.”&

John Purcell was called in to investigate by the complaints committee of the Chartered Accountants Regulatory Board ) in February 2009. Mr Purcell found there was prima facie evidence of a case to answer on three major errors in Anglo’s 2008 accounts:

*That Ernst & Young failed to detect the scale of Mr FitzPatrick’s loans, their systematic refinancing and non-disclosure in Anglo’s 2008 accounts;

*That auditors did not mention the €7bn so-called “bed and breakfast” transfer of deposits between Anglo and Irish Life & Permanent in September 2008 designed to prop up the bank’s balance sheet;

*That Ernst & Young failed to ensure a loan to former Anglo director William McAteer was disclosed in the accounts.

Ernst & Young will be called to answer in front of the board’s disciplinary panel to answer the claims.

The company insisted it did not encourage or advocate any of the rogue transactions.

It added that any audit depends upon the openness, honesty and transparency of the management of the company being inspected.

Anglo’s former management is being investigated on suspicion of withholding information from auditors.

Mr Purcell said there was no case to answer on other grounds, including that Ernst & Young was unaware of the Maple Ten deal, a €300m loans-for-shares scam aimed at stabilising Anglo’s share price.