Auditors face fine over Equitable

ACCOUNTANCY giant Ernst & Young is set to be hauled before the profession's disciplinary body over its involvement in the near-collapse of mutual insurer Equitable Life.

The firm could face a multi-million-pound fine and the partners responsible barred from working as accountants.

Draft charges against Ernst & Young partners and the firm were made last week by the Joint Disciplinary Scheme, the organisation responsible for independent investigations into the work of chartered accountants. Ernst & Young has until Friday to respond.

The action adds to the pressure on Ernst & Young over the Equitable Life debacle. Already, it faces a £2.6 billion claim from the board of the insurer that is due to go before the High Court next April.

Equitable nearly collapsed in 2000 after the courts ordered it to honour financial promises to policyholders that it was unable to meet.

It was left with a £1.5 billion bill that forced it to close the doors to new business.

Since then, many of its 750,000 policyholders have been pressing for compensation. Last month, they were given hope when Parliamentary Ombudsman Ann Abraham said she would look afresh at whether regulators and government bodies should have done more to spot the problems.

The case against Ernst & Young names Paul McNamara, the lead audit partner on the society's account, and one other Ernst & Young accountant. McNamara is expected to play a central role in defending the firm.

It is understood that they have been accused of 'general audit failure' - failing to identify the problems that led to the crisis four years ago.

Once Ernst & Young responds to the charges, the case will go to a tribunal, which has the power to reprimand both individuals and the firm as well as issue unlimited fines.

Kevin Russell, director of communications for Ernst & Young, said: 'We believe that the allegations are misguided and we will vigorously defend them.' An Equitable spokesman said: 'It is not appropriate for us to comment on legal proceedings, but we have strong claims against Ernst & Young and we will see them in court.'

It is also believed that the former bosses of Equitable Life - Alan Nash, Roy Ranson and Chris Headdon, who each led the society in the Nineties - face an inquiry from their own professional body, the Institute of Actuaries.

Last month, Headdon was barred from working in financial services for six years by the Financial Services Authority, the City watchdog.