As these earlier posts report, big four accounting firm KPMG has been keeping its defense lawyers quite busy. Now it appears that fellow big four firm Ernst & Young is getting into the act.
Floyd Norris of the NY Times reports today on an unusual court order that the chief SEC administrative judge issued yesterday that fined E&Y a cool $1.7 million and precludes the firm from taking on new audit clients in the U.S. for six months as a penalty for the firm’s improper conduct in auditing PeopleSoft, Inc. at a time in which the firm maintained a highly profitable consulting arrangement with the company.
The six-month suspension ties the longest suspension on signing new business ever imposed on one of the leading accounting firms. In 1975, Peat Marwick, a predecessor of KPMG, accepted a similar six-month suspension as part of a settlement of charges that it failed to audit several companies properly, including Penn Central, the railroad that went bankrupt back in the early 1970’s.