LONDON, April 16 (Reuters) - Britain's Financial Reporting Council has opened an investigation into EY over its audit of Post Office Limited, it said on Wednesday, amid the lingering fallout from one of the country's worst miscarriages of justice. The FRC stated it will focus on the audit firm's role in approving the Post Office's financial statements from 2015 to 2018, particularly regarding the Horizon IT system, which was at the heart of the scandal.
“We have been notified of the FRC’s intention to open an investigation into the EY audits of Post Office Limited for the financial years ending March 2015 – March 2018,” a spokesperson for EY said. "We take our public interest responsibilities extremely seriously and will be fully cooperating with the FRC during their investigation,” the spokesperson added.
Between 1999 and 2015, hundreds of self-employed workers at the state-owned Post Office were wrongly prosecuted or convicted for false accounting, theft, and fraud, due to glitches in a software system that incorrectly showed money missing from accounts. Some were jailed, lost their marriages, or otherwise saw their lives destroyed, while others died before their names could be cleared.
Spurred into action last year by public outcry following a television series that dramatized the scandal, then-Prime Minister Rishi Sunak sought to quash the wrongful convictions. A police investigation and public inquiry have also been carried out.
The investigation into EY will have a “particular reference to matters related to the Horizon IT system,” the regulator said, focusing on auditing standards rather than the broader issues related to the software. More than 900 subpostmasters were prosecuted during the scandal, with many still awaiting compensation despite the previous government announcing that those who have had convictions quashed are eligible for £600,000 payouts.
A lengthy public inquiry into the scandal has shown the Horizon software was faulty and created false shortfalls in the accounts of the subpostmasters. The FRC stated it waited to open its investigation until public hearings carried out as part of the inquiry were complete, although the formal findings are still to be outlined in a report.
In a statement, the FRC said, "In accordance with our statutory responsibilities, we will investigate whether EY's audits of Post Office Limited were conducted in compliance with the relevant auditing standards." This statement underscores the seriousness of the situation and the potential ramifications for the auditing firm.
The Post Office scandal is widely regarded as the biggest miscarriage of justice in British legal history, resulting in the wrongful prosecution of numerous sub-postmasters and postmistresses. Many were jailed for crimes such as theft, fraud, and false accounting when the Post Office’s IT system, Horizon, built and managed by Fujitsu, showed shortfalls in their accounts.
As the investigation unfolds, it raises questions about corporate accountability and the role of auditors in safeguarding the integrity of financial reporting. The implications of this case extend beyond the Post Office and EY, as it touches on broader issues of trust in financial institutions and the justice system.
While the FRC's investigation is underway, the public and those affected by the scandal are keenly watching how the situation develops. There is a strong desire for justice for those wrongfully accused, and for accountability to be enforced within the auditing profession.
As more details emerge, the focus will likely remain on the systemic failures that allowed such a significant miscarriage of justice to occur, and how similar situations can be prevented in the future. The outcome of the FRC's investigation may also influence future regulations and standards within the auditing industry.
In light of these developments, the importance of rigorous auditing standards and ethical practices in the financial sector cannot be overstated. The case serves as a reminder of the critical role that auditors play in ensuring transparency and accountability in financial reporting.
As the investigation proceeds, it is expected to shed light on not only the actions of EY but also the broader implications for the auditing profession as a whole. Stakeholders are hopeful that this inquiry will lead to meaningful changes that will prevent similar injustices from occurring in the future.
The FRC's investigation is a crucial step in addressing the fallout from the Post Office scandal, and it highlights the need for continued vigilance in the auditing industry. The hope is that through this process, those wrongfully convicted will finally receive the justice they deserve, and that the integrity of the financial system will be upheld.
