EY, one of the “big four” accounting firms, is being investigated over how it audited the accounts of the Post Office as the postal branch network wrestled with the Horizon software scandal that resulted in hundreds of post office operators being wrongly convicted.
The UK’s accounting regulator, the Financial Reporting Council (FRC), said it had begun an investigation into whether the firm met its standards “with particular reference to matters related to the Horizon IT system”.
The Horizon accounting software was developed by Fujitsu and was at the heart of the Post Office scandal, described as the UK’s most widespread miscarriage of justice, which has been the subject of a long-running inquiry that concluded its hearings in December.
The FRC said: “So as not to interfere with the Post Office Horizon IT inquiry, the opening of this investigation follows the conclusion of the public hearings. While the inquiry was extensive, it purposefully did not encompass the role or knowledge of external auditors in its scope.”
It added that the Institute of Chartered Accountants in England and Wales was the recognised supervisory body that would typically be charged with assessing the accounting at the Post Office, but “the FRC has reclaimed this matter given the heightened public interest considerations”.
The investigation will examine four financial years up until 25 March 2018, the regulator said.
Post Office executives spent more than £130m of taxpayers’ money defending the company at the long-running inquiry into the wrongful prosecution of more than 900 workers because of incorrect information from the Horizon computer system. Between 1999 and 2015, branch operators were hounded for money, jailed and even pushed to taking their own lives by the actions of the Post Office.
The long-running scandal entered the heart of public debate after it was dramatised in the hit ITV series Mr Bates vs the Post Office at the start of last year. Hundreds of those accused have since been exonerated and have been urged to apply for compensation.
The FRC investigation is the latest in a string of cases where regulators have examined the conduct of big accountancy firms.
Last May, EY and its rival PricewaterhouseCoopers were fined a combined £9.3m by the FRC for a series of failures in auditing the accounts of London Capital & Finance, the mini-bond firm whose collapse wiped out the investments of thousands of savers.
EY said it took its responsibilities “extremely seriously” and would be “fully cooperating” with the FRC.
