Washington (April 16, 2004) -- A chief administrative law judge here barred Big Four firm Ernst & Young from accepting new Securities and Exchange Commission audit clients for six months, and ordered the firm to disgorge $1.686 million in audit fees and prejudgment interest in a case brought by the SEC related to the firm's independence in its audits of former client Peoplesoft.
At issue is whether E&Y was independent when it audited PeopleSoft’s financial statements for fiscal years 1994 through 1999. In her decision Friday, Judge Brenda P. Murray also ordered the firm to hire an independent consultant to work with E&Y "to assure the commission that Ernst & Young LLP’s leadership is committed to, and has implemented policies and procedures that reasonably can be expected to remedy, the violations found in this initial decision."
In her findings, Murray stated that "the evidence shows EY has an utter disdain for the commission's rules and regulations on auditors independence." She goes on to note that "the persuasive evidence in this record is that EY is neither implementing, nor does it have in place, policies and procedures that can reasonably be expected to ensure compliance with independence rules in business dealings with audit clients."
She also ordered that the independent consultant report in writing to the SEC the findings of its review six months after it begins its work.
E&Y can petition for review of the decision.
-- WebCPA staff
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