Farepak loans 'nothing to do with audit'

Questions were being asked this week about the demise of Farepak, focussing on a series of loans made by the company.

Speculation about the demise of the Christmas hamper group this week focused on loans made by the company to its parent, audited by Ernst &Young. There are questions as to whether the loans meant that money from savers was being used to pay off the group’s bank debts.

E&Y is set to defend itself by saying that the existence of inter-group loans makes no difference to an audit opinion, since the loans made no material difference to the group as a whole.

DTI investigators are looking broadly into the demise of Farepak after hundreds of thousands of savers lost Christmas savings.

In a statement, E&Y said that it had not signed off an audit for 2006, and that the most recent accounts it had looked at were the year to 30 April 2005: ‘At the time of the signing of our audit report on the accounts for the financial year ended 30 April 2005 we could not have predicted the chain of events that led to the suspension of the shares of EHR in late August 2006. We stand by the judgments that we made when we signed our audit report.’

Further reading:

BDO and DTI to investigate Farepak collapse

Equitable case flawed from start to finish

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