Ernst & Young LLP
Consent order made on 12 January 2012
With the agreement of Ernst & Young LLP of 1 More London Place, London, SE1 2AF, the Investigation Committee made an order that the firm be severely reprimanded, fined £40,000 and ordered to pay costs of £10,055, with respect to a complaint that:
1 On 27 October 2004 Ernst & Young LLP (the firm) issued an unqualified audit report in respect of the financial statements of X Limited for the period ended 31 December 2003 when, in breach of Audit Regulation 3.08a, the audit had not been conducted in accordance with the following Statements of Auditing Standards (SAS):
a) SAS 210, Knowledge of the business, in that the firm failed to obtain and document a knowledge of the entity which was sufficient to enable it to identify the events, transactions and practices that may have a significant effect on the financial statements or the audit thereof;
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b) SAS 400, Audit Evidence, in that the firm did not obtain sufficient appropriate audit evidence on which to base its audit opinion in respect of trade debtors of £6,638,000 and work in progress of £6,423,000.
2 On 19 July 2005 Ernst & Young LLP (the firm) issued an unqualified audit report in respect of the financial statements of X Limited for the year ended 31 December 2004 when, in breach of Audit Regulation 3.08a, the audit had not been conducted in accordance with the following Statements of Auditing Standards (SAS):
a) SAS 210, Knowledge of the business, in that the firm failed to obtain and document a knowledge of the entity which was sufficient to enable it to identify the events, transactions and practices that may have a significant effect on the financial statements or the audit thereof;
b) SAS 400, Audit Evidence, in that the firm did not obtain sufficient appropriate audit evidence on which to base its audit opinion in respect of trade debtors of £9,330,000 and work in progress of £6,191,000.
3 On 31 October 2006 Ernst & Young LLP (the firm) issued an unqualified audit report in respect of the financial statements of X Limited for the year ended 31 December 2005 when, in breach of Audit Regulation 3.08a, the audit had not been conducted in accordance with the following International Standards on Auditing (UK & Ireland) (ISA):
a) ISA 315, Understanding the entity and its environment and assessing the risks of material misstatement, in that the firm failed to obtain and document the key elements of its understanding of the entity and its environment, including internal controls, sufficient to identify and assess the risks of material misstatement of the financial statements and sufficient to design and perform further audit procedures;
b) ISA 500, Audit Evidence, in that the firm did not obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base its audit opinion in respect of trade debtors of £9,826,000 and work in progress of £8,927,000
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