Another chapter in the Equitable
Life Assurance Society (ELAS) saga is complete, with a £500,000
($730,000) fine for Ernst & Young (E&Y) relating to
shortcomings of audits carried out on ELAS between 1997 and 1999.
Financial difficulties brought ELAS to near-collapse in 2001.

The fine was handed down to E&Y
by the UK accountancy profession’s Appeal Tribunal following an
appeal lodged by E&Y against a £4.4m fine imposed by the
profession’s Joint Disciplinary Tribunal (JDT) in 2008. Under the
Appeal Tribunal’s ruling, E&Y will also pay costs of £2.4m,
down from costs of £5.75m the JDT imposed.

The Appeal Tribunal overturned a
finding by the JDT that E&Y and a former E&Y partner were
guilty of 20 counts of “lack of professional competence” relating
to the auditing of ELAS.

The Appeal Tribunal also rejected
the JDT’s finding that they were guilty of a “lack of objectivity
and independence,” which the JDT viewed as the most serious

Welcoming the Appeal Tribunal’s
ruling, E&Y said in a statement: “Any lessons from our audit of
Equitable have long been learned and embedded in our audit systems
and procedures.”

The Equitable Members Action Group
(EMAG), an organisation representing the rights of aggrieved ELAS
policyholders, was reported by newspaper The Guardian to
have commented that the fine imposed on E&Y appeared to look
like “little more than a slap on the wrist.”

E&Y, however, claims that the
events that caused ELAS’ problems “lay well outside of our control
and the remit of our role as auditor.”

In a 1998 report by Parliamentary
Ombudsman Ann Abraham directed condemnation at three regulatory
bodies – the Financial Services Authority, the Government Actuary’s
Department and the former Department of Trade and Industry – in
relation to their regulation of ELAS.

In a recent statement the new
financial secretary to the UK Treasury Mark Hoban said the
government is to address the situation of ELAS policyholders in
order to ensure establishment of an independent payment scheme that
is “fair to both taxpayers and policyholders.”

EMAG has estimated that total losses incurred by policyholders
could be as high as £4.65bn.