Ernst & Young, one of the big four accounting firms, already facing a £2.6 billion negligence claim by UK life assurer, Equitable Life, has been banned from doing business for 6 months by Judge Brenda Murray in an action against it brought by US Securities and Exchange Commission. The SEC alleged that E&Y fatally compromised its independence by signing a business agreement with its audit client , PeopleSoft, to provide software and consultancy. E&Y was PeopleSoft’s auditor from the mid 1990s to 2000 while at the same time providing them software and consultancy. Ordering that E&Y “cease and desist” from future violations and pay a fine of $1.7 million the judge said: “Despite E&Y’s strong denials , the evidence shows that the firm paid only perfunctory attention to the rules on auditor independence in business delings with a client”. 

E&Y is being targeted by investors in UK and USA over its audits of Equitable Life which according to Lord Penrose had a culture of concealment and the Alabama health group HealthSouth, which was at the heart of a huge fraud. It received bad publicity over tax work for former executives at telecommunication company Sprint.
Calling Ernst'd condusct " reckless, highly unreasonable and negligent," Judge Murray wrote Ernst had virtually no system in place to ensure compliance with auditor-independence requirments and disregarded what few internal guidlines it had written on the subject.