EY’s audits of Anglo involved serious failings, report alleged

Report compiled for disciplinary procedure uncovered failings

Former Anglo Irish Bank chairman Seán FitzPatrick. The accounting treatment of his personal loans with the failed bank formed part of an investigation into audit work carried out by EY at Anglo. Photograph: Court Collins

Former Anglo Irish Bank chairman Seán FitzPatrick. The accounting treatment of his personal loans with the failed bank formed part of an investigation into audit work carried out by EY at Anglo. Photograph: Court Collins

 

Serious failings and professional incompetence were alleged in an unpublished report compiled by a former comptroller and auditor general into elements of Ernst & Young’s audits of Anglo Irish Bank in the years leading up to its nationalisation in early 2009.

The report, seen by The Irish Times, documents a series of shortcomings in how the accounting firm, now known as EY, failed to uncover suspect practices relating to loans held by former chairman Seán FitzPatrick and its former finance director Willie McAteer, and the movement of €7.2 billion between Anglo and Irish Life & Permanent in 2008.

The report was produced in 2011 by former C&AG John Purcell for Chartered Accountants Ireland (CAI), of which EY is a member. It was never published in full, and was put on ice while a series of trials relating to Anglo went through the courts.

Mr Purcell’s report said EY’s failure to detect the scale of Mr FitzPatrick’s loans and their “systematic refinancing over year ends and the lack of appropriate disclosure in the 2008 financial statements” represented “incompetence”.

‘Proper examination’

In connection with the €7.2 billion in transactions between Anglo and Irish Life & Permanent, Mr Purcell’s opinion was that there was a lack of “proper examination” by EY, representing “professional incompetence” on its part.

In relation to an €8.2 million loan to Mr McAteer, it found that EY was liable to disciplinary actions under the CAI’s bye laws.

EY has previously rejected the findings of the Purcell report and declined to comment to The Irish Times for this article.

Mr Purcell found that EY had no case to answer in relation to loans provided by Anglo to 10 customers for the purchase of shares controlled by businessman Seán Quinn, or in connection with certain loans provided by Anglo to key management.

The allegations in Mr Purcell’s report are expected to form part of the CAI’s disciplinary inquiry against EY, along with the firm’s response.