E&Y and the Battle of Bull Run
Big Five firm Ernst & Young has been hit with a lawsuit by Bull Run Corp., a company that provides, among other things, marketing and event management services to universities, athletic conferences, associations, and corporations.
The lawsuit alleges that E&Y failed to discover material errors in the accounting for prepaid expenses and receivables in its audit of Universal Sports America, Inc., a company that Bull Run acquired in late 1999. According to Bull Run, the company claims it "placed significant reliance on Ernst & Young's audit reports on the audited financial statements of Universal issued prior to the acquisition, and that those financial statements contained material errors."
The accounting errors resulted in an overstatement of net assets in the range of $11.3 million to $13.7 million. Due to the errors, Universal was forced to reissue financial statements. "[Universal's] financial statements contained materially false and misleading statements that would have been discovered by any competent auditor diligently following applicable professional standards," claimed the complaint, which was filed January 7. "EY's audit work had been negligently performed."
Meanwhile, E&Y is standing behind its work. "The firm is satisfied our work met professional standards and the firm is prepared to vigorously defend itself against this suit," said E&Y's director of public relations, Les Zuke.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.