Post Office auditor EY under investigation by accounting regulator FRC
Post Office auditor and big four accounting firm EY is being investigated by the industry's regulator.
Accounting and audit watchdog, the Financial Reporting Council (FRC), said the investigation related to EY's 2015 to 2018 audits of Post Office accounts and the faulty accounting software, Horizon IT.
The regulator will be examining the role of EY in meeting the auditing standards, the FRC said.
The Horizon computer programme, made by Fujitsu, wrongly generated financial shortfalls. This led many sub-postmasters to take on significant debt to repay the imagined losses, causing some to lose homes, become bankrupt, suffer ill health, and experience relationship breakdown.
Evidence from Horizon was used to prosecute hundreds of innocent sub-postmasters for theft and false accounting.
It is understood that the years from 2015 and 2018 were selected, as looking at a longer period of time would slow down the investigation, which would not be in the public interest.
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Information available to the FRC has to pass a threshold for an investigation to be launched, as the body does not undertake such examinations with the hope of making a discovery.
By 2015, the scandal had been reported on in the media, and the Post Office ceased bringing prosecutions using Horizon data.
Towards the end of 2015, 555 sub-postmasters instigated legal proceedings against the Post Office that would lead to the public admission of Horizon flaws. The last prosecution with Horizon data is believed to have been in 2014.
EY ceased to be the Post Office auditor in 2018, the year before the state-owned company publicly acknowledged and apologised for Horizon defects. It had been the auditor of Royal Mail since 1986, when Royal Mail and the Post Office were a single entity, and since the split-off of the businesses in 2013.
What next?
The FRC announcing this investigation neither precludes nor indicates further inquiries into EY audits across other years, Sky News understands.
While it is not possible to know how long the investigation will take, 50% of FRC cases are concluded within two years and 80% finish within three years.
The regulator can hit a firm with financial penalties or apply mitigation policies to a company to improve standards.
The Post Office Horizon IT Inquiry ran for two-and-a-half years to establish a clear account of the introduction and failure of Horizon, but its scope did not include the role or knowledge of external auditors.
Its developments had been monitored, the FRC said.
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