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The UK accounting regulator is investigating EY over its audits of the Post Office in the latest fallout from the Horizon IT scandal in which hundreds of postmasters were wrongly convicted on the basis of information from faulty software.
The Financial Reporting Council said on Wednesday it would scrutinise whether the Big Four firm’s work on Post Office audits for the 2015-to-2018 financial years met accounting standards.
The FRC said its investigation would have a particular focus on “matters related to the Horizon IT system”, which was at the heart of the scandal.
EY audited the Post Office’s accounts from the late 1980s until rival firm PwC took over in 2019.
The affair sparked public outrage when it was dramatised in a 2024 ITV series, prompting legislation to clear the names of convicted sub-postmasters.
The opening of the FRC probe follows the conclusion of public hearings carried out as part of a broader inquiry into the Horizon scandal, which did not cover EY’s audits of the Post Office.
That inquiry, which was established in 2020 to examine how more than 900 sub-postmasters were convicted using faulty data from the Horizon IT system, concluded its public hearings in December and is preparing to publish its final report.
According to testimony to the inquiry from former Post Office chair Alice Perkins in June, EY was aware of issues with the Horizon IT system as early as 2011.
The investigation by the accounting watchdog is the third time in a week that EY’s historic audit performance has been challenged.
Last week, the Big Four firm was fined £4.9mn for “serious breaches” when it audited collapsed travel company Thomas Cook, including failing to properly challenge the company’s management on its ability to continue as a going concern.
On Monday, the firm was fined a further £325,000 for signing off Stirling Water Seafield Finance’s books for 2019, which it belatedly discovered breached the 10-year maximum any auditor was allowed to work on a company’s accounts without a public tender process.
Oversight of audits of the Post Office usually falls to the trade body, the Institute of Chartered Accountants in England and Wales, but the FRC said it had “reclaimed” the matter owing to the “heightened” public interest surrounding it.
EY said it had been notified of the FRC investigation, adding: “We take our public interest responsibilities extremely seriously and will be fully co-operating with the FRC during their investigation.”
