Ernst & Young fined £500,000 over Equitable Life failings

Ernst & Young was fined £500,000 yesterday for failings in its role as the auditor for the troubled life assurer Equitable Life.

The company was also reprimanded over its audit reports on Equitable Life between 1997 and 1999, and told to pay costs of £2.4m for not alerting policyholders about the society's problems.

The judgment by the accountancy profession's Appeal Tribunal also reprimanded Kevin McNamara, who was the partner in charge of client service at Ernst & Young at the time. Mr McNamara has since retired.

The decision to discipline Ernst & Young and Mr McNamara was taken in 2008 but was kept under wraps to allow for an appeal. The accountants' Joint Disciplinary Tribunal (JDT) originally imposed a £4.4m fine with £5.75m costs, together with severe reprimands for the firm and Mr McNamara.

However, Ernst & Young showed scant contrition yesterday. It said: "The allegations that we lacked objectivity and independence were acknowledged by all parties as 'by far the most serious' that we faced – the rejection of these findings by the Appeal Tribunal led to their decision to significantly reduce our fine (by more than 90 per cent).

"All complaints against us for eight of the 11 audit years, from 1990 to 2000, were struck out by the JDT. We are nonetheless disappointed by the remaining adverse findings of the JDT in relation to aspects of the audit for the financial years 1997-1999."

Equitable took legal action against Ernst & Young over its audit work but lost in the High Court. The insurer, whose problems began when a court insisted that it pay guarantees offered to holders of guaranteed pension annuities, is seeking state compensation for policyholders in a campaign led by the actress Honor Blackman.

Two years ago, the Parliamentary Ombudsman found that the previous Government committed maladministration over its regulation of the insurer. In 2009, the Government accepted some but not all of the ombudsman's findings and asked a former appeal court judge, Sir John Chadwick, to advise on ex-gratia payments. He will report to the coalition next month.

Equitable said: "We have noted this report. Today, the board of Equitable Life is focused on recreating value for our policyholders in the future. We are working with the new Government to establish a compensation scheme that is swift, simple, transparent and fair."