Tuesday 17 November 2020 10:40 am

Ban EY from public contract bids following professional misconduct, urges charity

The government should consider banning big four auditor EY from bidding on public contracts for three years following a number of recent scandals, charity Spotlight on Corruption has said.   

The charity has written a 17-page letter to government that accuses EY of “grave professional misconduct” that “renders its integrity questionable”, and suggests there should be a full review into EY’s role as a key strategic supplier to the Crown Commercial Service.  

Read more: EY prepared ‘unqualified audit’ for Wirecard last month

The letter also calls for the government to require EY to carry out an independent assessment into why misconduct has occurred at the firm and what steps EY needs to take to ensure that misconduct does not happen again, at the expense of EY.

EY disagreed with the characterisation of the conglomerate that was outlined in the letter. A statement form the firm said: “We strongly dispute the characterisation of EY by Spotlight on Corruption. Nothing is more important than the quality of the services we provide at EY.

“We work in a highly regulated industry and take our responsibilities extremely seriously. We are committed to adhering to the relevant regulatory and legal standards, as well as the EY Global Code of Conduct, and take action where we find anyone in breach of these standards.”

Read more: FRC tells Big Four auditors to accelerate break-up plan

EY is designated as a key supplier on the government’s list. According to consultancy firm Tussell, EY was awarded 223 UK public sector contracts worth £229m in the period 2015-2019. Some EY consultants have worked on the government’s coronavirus Test and Trace programme. 

In the letter Spotlight on Corruption alleges EY has been involved in “serious and repeated” violations of company law, international accounting standards and industry-standard ethical frameworks. 

Read more: EY told Wirecard that KPMG audit ‘risked misinterpretation’

The letter gave examples of recent scandals surrounding EY, including in April 2020, when the High Court found EY committed professional and ethical misconduct in handling the audit of a Dubai metal trader – EY and its audit team failed to report billions of dollars’ worth of cash transactions involving smuggled gold from Morocco and to report other high-risk transactions.

EY is currently being investigated by the Financial Reporting Council for its role in the audits of NMC Health and London Capital and Finance, which have collapsed following major fraudulent activity.

Read more: Wirecard auditor EY prepares for backlash over scandal

The big four firm is also caught up in the recent Wirecard scandal, and the German auditing regulator is reportedly examining EY’s involvement with the firm. 

The letter continued: “Given the pattern of serious misconduct by EY, it is clear to us that awarding contracts to EY creates unnecessary risk to the taxpayer, and threatens reputational damage to the government. 

“Exclusion would send a strong signal to audit firms and other companies that serious corporate misconduct, governance failures and breaches of professional and ethical standards will not be tolerated.”