FRC to investigate EY’s auditing of NMC
4 May 2020
The Financial Reporting Council (FRC) is to investigate EY’s auditing of troubled FTSE 100 medical group NMC Health, which has gone into administration following the discovery of a string of accounting irregularities
4 May 2020
The regulator has announced a probe into EY’s audit of the company’s financial statements for the year ended 31 December 2018.
The investigation will be conducted by the FRC’s enforcement division under the audit enforcement procedure.
In February NMC reported the discovery of $335m (£258m) in previously undisclosed loans to related parties, and a further investigation by PwC unearthed over $2.7bn (£2bn) in undisclosed debt.
In April Alvarez & Marsal Europe was appointed as administrators to the company in response to a petition presented by Abu Dhabi Commercial Bank (ADCB), one of NMC’s largest creditors.
In addition, ADCB said it had initiated criminal legal proceeding with the Attorney General in Abu Dhabi against a number of individuals in relation to NMC Health Group.
NMC founder Bavaguthu Shetty is also the founder of Finablr, the parent company of foreign exchange provider Travelex, which has reported accounting difficulties as well, including the discovery of £100m (£80m) in undisclosed cheques.
At the end of last month, Shetty put out a statement which said: ‘The preliminary findings provided by my advisors and from my own investigations indicate that serious fraud and wrongdoing appears to have taken place at NMC and Finablr, as well as within some of my private companies, and against me personally.
‘This fraud also appears to have been undertaken by a small group of current and former executives at these companies.’
NMC is the largest private healthcare provider in the UAE with operations both there and in 19 other countries. It was listed on the London stock exchange in 2012 and entered the FTSE 100 ranking in September 2017.
EY was appointed as auditor to the company at the time of the IPO in April 2012. According to NMC’s annual report for 2018, the Big Four firm was paid $4m in audit fees for the year, plus non-audit fees of $984,000.
EY was previously Finablr’s auditor but resigned at the end of March, citing concerns over the FTSE 250 company’s governance and demanding board changes, including the removal of a former EY partner as a non executive director.
The FRC’s announcement follows the Financial Conduct Authority’s decision in February to launch an investigation into NMC's activities after the company's shares were suspended from trading.
An EY spokesperson told Accountancy Daily: 'We can confirm that EY has been notified of the FRC’s intention to conduct an investigation into the audit of NMC Health plc for the year ended 31 December 2018. We will be fully cooperating with the FRC during their enquiries. It would be inappropriate to comment further at this time.'