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Tuesday, 21 May, 2002, 05:23 GMT 06:23 UK
US questions Ernst & Young's independence
Ernst & Young has denied the allegations
The accounting giant Ernst & Young has been accused of violating rules covering auditors' independence.

The US stock market regulator has said the accountant "engaged in improper professional conduct" when it joined forces with its client Peoplesoft to develop and market tax software.

As part of the firms relationship between 1994 and 2000, Ernst & Young paid Peoplesoft a 15-30% commission for each sale of its tax software, or a minimum royalty of $300,000 (205,000), the Securities and Exchange Commission (SEC) said.

The allegations could further weaken the reputation of accountancy and financial firms, which has been knocked in the wake of the Andersen/Enron scandal and by allegations of analysts giving misleading investment advice about client firms.

Fees

The software in question had been developed by Peoplesoft.

Ernst & Young earned several hundred million dollars in consulting fees from advising clients to use the software.

The SEC called for Ernst & Young to hand back audit fees and halt the practice.

A hearing into the affair is due to be held before a civil judge, the SEC said.

Denial

Ernst & Young has denied any wrongdoing and vowed to defend itself vigorously.

"We are surprised and disappointed that the SEC has chosen to take action on this matter," the company said.

"Our conduct was entirely appropriate and permissible under the profession's rules."

See also:

16 Apr 02 | Business
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