Farepak auditors E&Y fined £1.2m by regulator
Ernst & Young (EY) has been fined almost 1.2m for failings linked to the collapse of Christmas savings club Farepak, which wiped pout the savings of thousands of families.
The Financial Reporting Council (FRC), regulator for the actuarial and accountancy professions, fined EY £750,000 for failure to comply with regulatory auditing standards. It also ordered the firm to pay £425,000 in legal costs.
The fine would have been £100,000 more at £850,000 had EY not co-operated with the investigation.
Paul George, FRC executive director of conduct said: "The FRC is pleased with the outcome of this case, which sends a strong clear reminder to all accountants and accountancy firms that they have a responsibility to carry out their professional work with due skill, care and diligence in the audit of subsidiary entities and obtain corroborative evidence to support management representations.
"The result in this case underlines the FRC's commitment to promote public confidence and ensure the accountancy profession has proper regard for the technical and professional standards expected of members."
Farepak operated a Christmas savings plan, whereby savers would deposit their cash in return for the promise of hampers or vouchers. But the firm collapsed in late-2006, leaving over 100,000 people unable to access their savings.
Subsequent investigations found that savers' cash had not been set aside, it had instead gone towards helping parent group European Home Retail (EHR).
The FRC says EY's auditors did not perform their tasks with due diligence when auditing Farepak's 2005 accounts
Alan Flitcroft, the senior auditor in charge of the HER and Farepak account, was also ordered to pay a fine of £50,000, reduced from £60,000 after Flitcroft co-operated with the regulator. He will also be reprimanded, the FRC said.