Both of the actions relate to accounting failings by E&Y, with the DFSA ruling, which was made yesterday, resulting in a fine of AED 183,500 ($50,000, £30,780 €38,200).
The DFSA, which brought the case against the firm through the independent Financial Markets Tribunal, said E&Y failed to comply with International Standards of Auditing when auditing a company called Arqaam Capital’s accounts in 2009.
Specifically, E&Y and Arqaam were accused of making a transaction in artwork which was “an accounting trade which lacked economic substance” and which was “not an arm’s length transaction”.
Both companies agreed to the fine.
In Hong Kong meanwhile, E&Y is in trouble for failing to produce to the SFC the accounting records of Standard Water – a Hong and China based water company.
According to the regulator, E&Y were issued with a formal notice asking for the audit working papers and underlying accounting documents relating to Standard Water. However, E&Y did not comply with this request and claimed it did not have the relevant records which it said “were held on the Chinese mainland by its joint venture partner, E&Y Hua Ming, whose staff were the ones involved in the engagement”.
On following up the non-compliance, E&Y then claimed the documents could not be produced because of “restrictions under People’s Republic of China law”.
The SFC said it then sought the assistance of the relevant authority in the mainland using its standing arrangements for mutual assistance in investigatory matters. However, EY Hua Ming also failed to produce the records to the relevant Mainland authority as requested.
In a statement the SFC said: “Given Ernst & Young was the reporting accountant and EY Hua Ming was Ernst & Young’s agent, the failure to produce these records to the relevant Mainland authority on the SFC’s request is a matter of serious concern.”