EY, one of the UK’s major accounting firms, is facing a formal investigation over how it audited the Post Office’s financial records during the years when the Horizon IT system scandal unfolded. The Financial Reporting Council (FRC), the UK’s accounting regulator, has launched the inquiry to determine whether EY upheld auditing standards, specifically in relation to the controversial Horizon system.
The Horizon software, developed by Fujitsu, became central to what is now considered one of the UK’s worst miscarriages of justice. Between 1999 and 2015, inaccurate data generated by the system led to the wrongful prosecution of more than 900 sub-postmasters. Many were accused of theft and false accounting, with some imprisoned and others suffering devastating personal consequences—including financial ruin and, in some tragic cases, suicide.
The FRC noted that the timing of the investigation was carefully planned to avoid interfering with the official Post Office Horizon IT inquiry, which concluded public hearings in December. While that inquiry covered a wide range of issues surrounding the scandal, it did not extend to the role or awareness of external auditors, prompting the FRC to step in.
Ordinarily, the oversight of accounting practices at the Post Office would fall under the Institute of Chartered Accountants in England and Wales. However, the FRC has taken over the matter due to the significant public interest involved. The investigation will scrutinize EY’s audits of the Post Office across four financial years, ending in March 2018.
During the scandal’s lengthy fallout, Post Office leadership spent more than £130 million in public funds to defend the organization’s actions, even as growing evidence revealed the extent of the wrongful convictions. The issue gained renewed public attention through a widely watched TV drama early last year, which helped push the topic into the national spotlight and added urgency to the push for justice and compensation for affected individuals.
This latest investigation adds to a broader pattern of scrutiny faced by major accounting firms. In a previous case, EY and another leading firm were fined millions for failures linked to the collapse of a financial company that had devastating effects on investors.
Responding to the investigation, EY stated that it takes its professional responsibilities very seriously and intends to fully cooperate with the FRC.
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