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EY Gave a Hilarious Excuse For Walking Away From This Awful Municipal Audit Client

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Across the pond, EY is earning headlines for its abandoning the Wokingham Borough Council, a government locale in the southeast of England with a population of 177,500, after barely completing an audit for 2020/21.

Bracknell News:

Accountancy firm EY is responsible for carrying out the council’s annual external audits – examinations of its finances. But after long delays, EY announced in February that it will leave two years’ audit reports incomplete.

One angry councillor, Mike Smith, accused the firm of ‘downing tools and walking away’ from the job. He added: “Clearly something is catastrophically wrong.”

By law, every local authority has to have its finances audited by an external accountancy firm. But delays beginning during the coronavirus pandemic mean there is now a huge national backlog leaving years upon years’ worth of audits still to be completed.

The 2020-2021 audit was finally completed last year for which EY charged an extra £60,654 (about $77,000 USD) because the firm hadn’t gotten timely information on infrastructure assets and pension funds. The council complained about this, naturally.

The pension fund is managed by the neighboring Royal Borough of Windsor and Maidenhead and they, too, are having issues with timely information. Deloitte is still trying to finish their 2020-2021 audit and about ready to dip out. “If audits are not finished by the backstop date [in September], then the audit will be stopped, and the opinion modified on the basis that the work is not complete,” said Deloitte partner Jonathan Gooding at a meeting of the RBWM audit and governance committee just last week.

What’s funny is EY said they can’t complete the delayed audits for Wokingham now because the people who would do them are doing other things. Yeah, like other terrible government audits.

Councillor Stephen Newton asked EY to reconsider – pointing out that the government has recently given firms extra time to complete delayed audits.

But Janet Dawson from EY said the firm had already allocated its staff to other jobs and couldn’t move them back.

She said EY had expected to be able to complete the audits before Christmas, but hadn’t received sufficient information on how council-owned properties had been valuated. The Council disagrees, arguing the information it has given should be enough.

The firm will issue a disclaimer of opinion for the 2021-22 and 2022-23 audits it was unable to receive sufficient and appropriate evidence for.

While not cutting as deep as the accountant shortage here in the US (yet), the UK is dealing with its own dearth of accounting professionals, particularly in certain regions that are less attractive to young recruits fresh out of college.

In December 2023, audit watchdog Financial Reporting Council expressed “disappointment with the unacceptable delays in financial reporting and audit in the local government sector” across the country as it released a report that noted more than 900 incomplete local government audits in England at the end of September 2023. Because of this, the FRC’s ability to inspect higher risk audits had been severely restricted.

The FRC inspected just 10 audits this year – 6 NHS [National Health Service] and only 4 in local government – compared to its usual 20. With most local government audits incomplete, often for multiple years, the FRC said it had to significantly reduce inspections to allow audit firms to focus resources on clearing the backlog.

So basically the whole thing is buggered and EY was probably smart to walk away.