Back in the heady days of the 1990s, it was unimaginable that the existence of even one of the Big Five accounting firms could ever be threatened. The collapse of Arthur Andersen left a Big Four and one more faces the possibility of collapse if a negligence claim against the firm is successful.
Ernst & Young's battle with Equitable Life took on epic proportions in the United Kingdom this week, with Ernst & Young's chairman Nick Land writing to the Office of Fair Trading to put the office on notice that the firm's potential liability exceeds its insurance coverage.
In Land's letter to Office of Fair Trading Chairman John Vickers, Land signaled the company could collapse if Equitable Life succeeds in its Â£2.6bn negligence claim with Ernst & Young. Land wrote, 'our cover is not adequate to meet claims at the level we are currently facing.' The case is due to be heard at the High Court in April, the UK's Financial Director magazine reported.
A spokesman for Equitable Life said that 'the board's advice is that it has a strong claim against E&Y,' although he would not comment on whether it would seek a settlement or take the case to trial.
Meanwhile, E&Y was due to submit its response to complaints made by the Joint Disciplinary Scheme by Friday last week. Roland Foord, a partner at City law firm Stephenson Harwood, said that while the JDS findings would not influence the civil judge should a trial go ahead, it 'could have some effect in terms of settlement' decisions, Financial Director reported.