Kevin Reed, Accountancy Age, Friday 4 June 2010 at 13:17:00

Appeal backs E&Y over objectivity and independence as Equitable auditor

Accountancy's regulator upheld E&Y's appeal against the earlier tribunaldecision that the firm and audit partner Kevin McNamara lacked objectivity andindependence as auditor of Equitable Life.

The Appeal Tribunal overturned the Joint Disciplinary Tribunal findings thatE&Y and McNamara had lacked objectivity and independence.

There was no evidence of an "improper element" in the relationship betweenthe firm/McNamara and Equitable.

The appeal said that a lack of professional competence by E&Y andMcNamara failed to justify an inference of lack of objectivity.

"In our judgment, mere lack of professional competence ? does not even beginto justify an inference that in relation to those areas E&Y and Mr McNamarawere guilty of the serious charge of lacking objectivity and independence," theappeal report stated.

The firm did not contest the JDT's findings that it should have warnedpolicyholders in Equitable's financial statement sof the consequences of losingthe Hyman case (which pushed Equitable to the brink of collapse), and that thestatements did not show a true and fair view because of that inadequateprovision.

Fines and costs against the firm were reduced to nearly 3m, from 10m underthe original findings.

"We welcome the fact that the Appeal Tribunal has significantly reduced ourfine by over 90% to 500,000 and has recognised the appropriateness of ourappeal by not awarding costs against us," said an E&Y statement.

Further reading:

E&Y pays out almost 3m following Equitable verdict