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November 21, 2012

E&Y UK to face FRC investigation

The UK Financial Reporting Council’s executive counsel has filed a disciplinary Formal Complaint against Ernst & Young (E&Y) and its former auditor, Alan Flitcroft, over its conduct as auditors to European Home Retail and its subsidiaries, including Farepack Food and Gifts.

The complaint follows an investigation into the conduct of E&Y and Flitcroft in relation to the audit of the accounts of Farepack for the period ending 28 April 2005.

The complaint alleges that the audit fell short of complying with requirements of applicable auditing standards.

The FRC claim that E&Y failed to properly consider the effect of certain "post balance sheet events," namely, material events that occur between the date financial statements are prepared up to, and the date at which they are issued, which would prevent these statements from being misleading.

The complaint goes on that E&Y failed to properly obtain sufficient appropriate audit evidence on which to base the audit opinion, consider Farepak’s ability to continue as a going concern and disclosures in the financial statements, consider management representations as part of audit evidence and document important matters in their working papers.

Christmas savings firm Farepak collapsed in 2006, leaving 114, 000 people with total losses of £37m.

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