The Post Office auditor and big four accounting firm EY are currently under investigation by the industry’s regulator, the Financial Reporting Council (FRC). The investigation pertains to EY’s audits of Post Office accounts from 2015 to 2018 and their involvement with the faulty accounting software, Horizon IT.
The Horizon computer programme, developed by Fujitsu, inaccurately generated financial discrepancies that led to many sub-postmasters accumulating significant debts to cover the supposed losses. This financial strain resulted in some individuals losing their homes, filing for bankruptcy, experiencing health issues, and facing relationship breakdowns. Furthermore, evidence from Horizon was misused to wrongfully prosecute numerous innocent sub-postmasters for theft and false accounting.
The FRC will be scrutinizing EY’s adherence to auditing standards during the specified period. It is worth noting that the investigation is focused on the years 2015 to 2018 to expedite the process and align with public interest.
EY ceased to be the auditor for the Post Office in 2018, a year before the state-owned company publicly acknowledged and apologized for the flaws in Horizon IT. EY had been Royal Mail’s auditor since 1986 when Royal Mail and the Post Office were part of the same entity before their separation in 2013.
The FRC’s investigation does not rule out potential further inquiries into EY’s audits in other years, according to Sky News. The duration of the investigation remains uncertain, but historical data suggests that around 50% of FRC cases are concluded within two years, with 80% finalized within three years.
The regulator has the authority to impose financial penalties on firms or implement corrective measures to enhance standards. The Post Office Horizon IT Inquiry, which spanned two-and-a-half years, aimed to provide a comprehensive account of Horizon’s implementation and failures but did not delve into the role or knowledge of external auditors.
EY has affirmed its commitment to cooperating fully with the FRC during the investigation, emphasizing their serious approach to public interest responsibilities.
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