£2.4m puzzle at Nationwide Accident

ERNST & Young is at the centre of an investigation into accounting irregularities at Nationwide Accident Repair Service following the revelation that previous profits have been overstated by £2.4m.

Nationwide said it had suspended a finance manager, whose name it refused to disclose, and called in forensic accountants from Grant Thornton to investigate the way stock movements had been recorded since 1999.

'Grant Thornton will look at the rationale as to what happened and what was or wasn't picked up in previous audits,' chief executive Adrian Dunleavy said.

Grant Thornton replaced Ernst & Young as Nationwide auditor when Dunleavy became chief executive last October. He said the switch was made before the accounting irregularities came to light.

Dunleavy said investigations carried out so far had uncovered no evidence that any Nationwide staff had benefited personally from the irregularities, and added that the case related solely to book-keeping issues.

Most of the £2.4m in profit downgrades would be applied to the 1999 accounts, with some flowing into 2000 and 2001, Dunleavy said. He added that the issues were contained to the parts wholesaling business PDS.

Nationwide shares lost 8 1/2p to 72 1/2p on the news.