The accounting firm EY is accused in a lawsuit of having overlooked significant fraud cases for years during the investigation of the British hospital provider NMC Health. Administrators are demanding $2.7 billion in damages, arguing that an inspection of the general ledger could have quickly uncovered the fraud.

According to a skeleton argument for a procedural hearing at the London High Court, EY could have identified the alleged fraud early if the firm had had access to the general ledger. This fundamental step in the independent audit was neglected over seven years, even though EY had already placed the NMC audit on the "close monitoring status" list in 2015 and included it in a separate "worry list" in 2018. Despite these internal concerns, EY issued unqualified audit reports from the stock market listing in 2012 until the final preparation of the annual accounts in 2019.

EY rejects the allegations and states that the audits were conducted properly. However, the case highlights a significant weakness in the audit processes of major accounting firms, which fail to adequately monitor critical financial data. NMC Health went into insolvency in 2020 after it was revealed that more than $4 billion in debt was hidden in its books – one of the largest fraud cases involving a publicly listed company in London.

The administrators, represented by Alvarez & Marsal, further argue that EY also failed to adequately control the confirmation processes for bank and credit accounts, and that NMC employees interfered in the communication with the banks. This resulted in billions of dollars in debt not appearing in the published financial reports.

The case brings to mind similar allegations against EY during the audit of the failed German payment service provider Wirecard. While the auditor is currently being additionally investigated by the British regulatory authority, the trial against EY is expected from April to October next year, with EY requesting a postponement until 2026.