Spotlight on E&Y's consultancy fees
ACCOUNTANT Ernst & Young reaped consultancy fees of more than £1.1m from Equitable Life in 1999 - the year it completed the Equitable audit for which it is now likely to be sued.
The fees were more than double those paid to E&Y for auditing the insurer's complex accounts, raising further questions about the desirability of having the same firm providing both auditing and consultancy services.
Equitable's audit costs rose from £386,487 in 1998 to £478,411 in 1999. But the amount paid to Ernst & Young in consultancy fees soared from £118,220 to £1.14m. The audit bill slipped in 2000 to £457,660 but the consultancy fees paid to E&Y ballooned to £6.4m.
E&Y has come under fire over its auditing of Equitable, particularly the 1999 accounts. Critics suggest it should have done more to highlight the society's potential liabilities to holders of guaranteed annuity rate policies. The House of Lords ruled in July 2000 that Equitable had to honour these promises, forcing it to devise the compromise deal just approved by members and the High Court.
Equitable has written to E&Y, 20 former directors and former lawyers Denton, Wilde Sapte warning it may sue them over 'serious concerns' about their work. E&Y has denied any wrongdoing.
