For the second time in four years, Ernst & Young (EY) in US has to pay hefty penalty due to the violation of independence standard. EY in 2004 was fined $1.7 million by SEC and handed six-month new client ban while this year the company may pay $1.6 million regarding their work with AIG and PNC Financial Services Group that allegedly violate the independence auditor conduct.
According to CFO.com, "an Ernst & Young partner helped AIG to develop and market an accounting-driven financial product, then advised PNC on the accounting treatment for that product in PNC's financial statements". Further, the product enables a company to transfer volatile financial assets to a special purpose entity, so as the related assets can be excluded from its consolidated financial report.
Concerning the issues, one of my friends was wondering about the possibility of liquidation for E&Y as a result of such continuous improper conduct (like Arthur Andersen's collapse in 1999). I argue to my friend that such action wouldn't be happend, since the US authority want to keep the audit market still competitive and free from oligopoly practice. As we know, nowadays, EY is one of the big four audit firms in the world. I couldn't dare to dream that there were only 3 big audit firms in the world. Besides, E&Y was my first professional company where I worked for 1.5 years in Jakarta, so I don't want my former company collapse due to any wrongdoings.
