Tuesday April 30, 2013 : WORLDSPREADS SUES AUDITOR FOR NEGLIGENCE (Update)
Ernst & Young did not pick up millions in shortfalls between 2007 and 2011, claims management
Business services and accountancy firm Ernst and Young is being sued by financial betting company Worldspreads for alleged negligence over its auditing services, reports the Irish newspaper The Independent.
The betting company was at the centre of a major financial scandal which resulted in its activities being suspended late last year.
WorldSpreads claims it could not continue to trade after a shortfall was allowed to grow over a number of years in its client account balances, which may exceed GBP 22 million.
It was unable to comply with UK Financial Service Authority (FSA) regulations and led to its board putting the company into special administration in March last year.
Management claims that Ernst & Young was negligent in the performance of its services and obligations to WorldSpreads Ltd in connection with audits carried out between 2007 and 2011.
The case was transferred to the Commercial Court this week by Mr Justice Peter Kelly on consent between the parties.
WorldSpreads Ltd is registered in the UK and a wholly-owned subsidiary of WorldSpreads plc, which is registered in Ireland. Ernst & Young's office in Dublin was engaged to carry out audits under the FSA’s supervision rules.
WorldSpreads Ltd alleges that Ernst & Young issued unmodified opinions on its financial statement audits from Mar 2007 which although they provided a list of breaches of the regulations, also stated WorldSpreads Ltd maintained systems to comply with the relevant FSA “client asset sourcebook” rules.
However, in Mar 2012, as a result of disclosures by WorldSpreads Ltd’s finance controller, the company became aware there was a substantial GBP 22 million shortfall in the amount of client money which ought to have been held in a segregated account.