Exclusive: Ernst, audit clients cut lobbying ties-records

Fri May 4, 2012 1:11am EDT
 
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By David Ingram and Dena Aubin

WASHINGTON/NEW YORK (Reuters) - Ernst & Young's lobbying unit is no longer listed as a lobbyist for three major U.S. companies, all of whom were 2011 audit clients of the accounting giant. The deregistration follows questions raised by two U.S. senators in March about whether the dual relationships crossed auditor independence boundaries.

Documents filed last month with Congress showed that Washington Council Ernst & Young, the E&Y unit, was no longer registered as doing lobbying work for Amgen Inc (AMGN.O: Quote), CVS Caremark Corp (CVS.N: Quote) and Verizon Communications Inc (VZ.N: Quote).

A lobbying-contract termination was also filed on March 31 for a fourth company, Nomura Holdings Inc (8604.T: Quote), which, according to securities filings, uses an E&Y affiliate for auditing services. E&Y had provided lobbying services to Nomura since June 2011, according papers on file with Congress.

Auditors that review corporations' books every year must follow rules limiting other ties with audit clients. The rules - meant to prevent auditors from getting too cozy with audit clients - were substantially beefed up a decade ago after a rash of accounting scandals at Enron Corp. and other companies.

An Ernst & Young spokesman declined to comment on the discontinued lobbying relationships. Officials with Nomura, Verizon and CVS declined to comment. Amgen officials could not immediately be reached for comment.

The chief accountant for the U.S. Securities and Exchange Commission, James Kroeker, speaking at a financial reporting conference at Baruch College in New York on Thursday, said SEC rules state an auditor should not act in an advocacy role for a company it audits and lobbying would be inconsistent with that.

Kroeker did not mention any audit firms by name.

He said: "If you think about lobbying in the traditional sense, you would say, 'wouldn't somebody that's lobbying be placing themselves in a position to be an advocate?'"   Continued...

 
The entrances to the offices of Ernst & Young is seen in New York April 28, 2009. REUTERS/Shannon Stapleton