Collapsed financial markets trading business Worldspreads has filed a lawsuit against its auditor, Ernst & Young (E&Y).

According to the Irish Times, Worldspreads, a UK company registered in Ireland, claims E&Y was negligent in carrying out its services and obligations to the company in connection with audits between 2007 and 2011.

The company said it could not continue to trade after a shortfall, which may exceed £22m, was allowed to grow over a number of years in its client account balances.

Worldspreads said the shortfall meant it was unable to comply with UK Financial Service Authority (FSA) regulations, leading to its board putting the company into special administration in March 2012.

E&Y denied the allegations and said: ""Ernst & Young do not accept that we are liable for any losses suffered by Worldspreads or any related party and we will vigorously defend any proceedings."

"Any audit depends to a substantial degree upon the openness, honesty and transparency of the management of the company being audited and on the auditor being supplied with full accurate and complete information," the firm said in a statement, but said it could not offer any further comment due to ongoing proceedings.

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According to Irish media reports, the case was transferred to the Commercial Court by Justice Peter Kelly on consent between the parties.