FRC opens investigation into EY over ‘unauthorised’ audit reports

The Financial Reporting Council (FRC) has launched a new investigation into EY yesterday (10 December) after the regulator opened a case into two auditors and the firm for issuing “unauthorised” audit reports. 

It is understood from the FRC that it has begun examining the conduct of the individuals and EY itself after the firm self-reported concerns involving unnamed companies. 

The new investigation was opened under rules covering potential misconduct or matters deemed to be in the public interest, including cases involving significant losses or large numbers of affected stakeholders.

The move adds to a series of ongoing regulatory actions already weighing on the Big Four group this year. EY is subject to four other FRC investigations, including one into its work on checking the books for the Post Office and another involving two unnamed companies launched earlier in 2024. 

Probes likewise continue into the audits of collapsed furniture retailer Made.com from 2023 and FTSE 100 hospital operator NMC Health from 2020.

The NMC Health audit is also before London’s High Court, where administrators have accused EY of negligence and are seeking about £2bn in damages on behalf of creditors who lost money when the hospital operator collapsed.

The succession of cases means EY could face further multimillion-pound penalties if the regulator finds breaches of audit requirements. The firm has already paid more than £5m in fines this year for “serious breaches” in its audit of failed travel group Thomas Cook and for auditing listed company Stirling Water Seafield Finance for more than 10 years without a public retender.

EY had also told the regulator it had identified the affected audited entities, corrected the relevant files and concluded that no changes were needed to the financial statements or audit opinions.

An EY spokesperson said: “We self-reported this matter to the FRC and will continue to fully co-operate with the investigation.”