Ernst & Young to face legal action over Anglo Irish failure

In what comes as the first instance of an Irish bank taking legal action against its ex-auditor, Ernst & Young is being taken to court by the state-owned Irish Bank Resolution Corporation (IBRC), which took over the operations of the collapsed Anglo Irish Bank three years ago.

While full details of the case are yet to be made public, it was believed the accountant would be accused of failing to spot the massive exposure of Anglo to the Irish property bubble, which led to its nationalisation.

Investigations into the bank's role in fraud have been ongoing over the past four years and three senior staff, including former chairman Sean FitzPatrick, would be facing criminal charges next year.

Ernst & Young had been under a two-year industry investigation for its part in the scandal, following which, former Irish comptroller and auditor general John Purcell said the firm failed to detect the scale of the bank's loans to the former chairman. The claims had been contested before the case came up to the Chartered Accountants Regulatory Board.

Anglo, rebranded recently as Irish Bank Resolution Corporation, said IBRC could confirm that it issued proceedings on 27 November 2012 against Ernst Young Chartered Accountants.

E&Y declined comment on the specifics of the legal action and said, although it was aware of proceedings issued by IBRC, it had not been served nor had it received a statement of claim setting out the details of IBRC's claim.

It said that without more detail it would be difficult to comment further. E&Y said it had consistently stood by the quality of its work performed in the Anglo audit and would vigorously defend any such proceedings.