EY investigated after breaching Scottish water company audit time limits

EY is under investigation by the UK accounting regulator after continuing to audit a Scottish water finance company for longer than allowed by the Companies Act.

The Financial Reporting Council said on Friday it was investigating EY’s audit of Sterling Water Seafield Finance’s accounts for the fiscal year ended December 2019, but did not specify the focus of the investigation.

The company, owned by French water and waste group Veolia, raises funds for other parts of the group to upgrade and operate wastewater treatment facilities.

According to filings with Companies House, EY will immediately appoint an auditor in April 2021 after belatedly discovering that it has approved a company’s account for more than the maximum number of years allowed by UK company law. I resigned.

“Due to inadvertent breach of the maximum engagement period, I have been reappointed as the company’s external auditor for the fiscal year ended December 31, 2019,” it said in a letter to the company’s directors at the time. .

“When we became aware of the violation, we notified the company’s directors,” it added.

This mistake is embarrassing for EY. EY charges clients millions of pounds annually to advise them on how to meet their regulatory obligations.

In a letter published on the Companies House website, EY encourages company directors to seek independent legal advice if they have questions about their legal obligations.

Aberdeen-based Sterling Water Seafield Finance has appointed mid-tier auditor MHA McIntyre Hudson to succeed EY.

EY took over the role of auditor from PwC in 2009. This meant that, depending on the process used to appoint the company, it was limited to a maximum tenure of ten years under UK company law.

The FRC said a decision on the investigation would be made in December and the investigation would be conducted under the FRC’s audit enforcement procedures.

EY is already the subject of FRC investigations into audits of NMC Health, Thomas Cook and London Capital and Finance, all of which went bankrupt within a matter of months in 2019 and 2020.

EY said it had been notified of the investigation and would cooperate fully with the FRC.

https://www.ft.com/content/252478b8-10f2-400b-800b-f03e05339f8e EY investigated after breaching Scottish water company audit time limits

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