Ernst & Young faces charges of negligence

Ernst & Young, one of the big four global accountants, came another step closer to receiving a hefty fine over its auditing of Equitable Life yesterday, as the Joint Disciplinary Scheme, the independent accountancy watchdog, confirmed that it was to press ahead with its charges of negligence.

Ernst & Young, one of the big four global accountants, came another step closer to receiving a hefty fine over its auditing of Equitable Life yesterday, as the Joint Disciplinary Scheme, the independent accountancy watchdog, confirmed that it was to press ahead with its charges of negligence.

Having filed a preliminary complaint to E&Y last month, the JDS said yesterday that it would hold a full disciplinary tribunal in its bid to castigate the accountant for bad practice.

The JDS said it had laid complaints against Kevin McNamara and Richard Combes, two auditors who worked on the Equitable Life account between 1990 and 2000. Charges include a failure to prepare Equitable's accounts in accordance with Companies Act legislation, as well as a lack of understanding of the relationship between bonuses, policyholder expectations, and the guarantees which Equitable made.

In its own statement, E&Y said: "We believe that the complaints are unfounded and misguided and we will be mounting a vigorous defence."

The firm added that it did not believe the outcome of the tribunal would have any bearing on the forthcoming court case, in which Equitable is suing E&Y for £2.5bn for failing to spot the problems in its account in the run-up to it closing to new business in 2000.

If E&Y loses its case against Equitable, it could be forced into insolvency. Along with its threepeers, the firm has been lobbying the Government to place a cap on auditors' liability.