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The state wants to revoke or suspend the license of Ernst & Young, the largest U.S. accounting firm, because of its audit work for Charles H. Keating Jr.'s Lincoln Savings and Loan Association.

Steve Miller, an attorney for Ernst & Young, said the company stands by its audit and will contest the case at hearings before the state Board of Accountancy.

A year before the S&L's seizure, Ernst & Young's predecessor, Arthur Young & Co., issued an unqualified opinion that Lincoln's upbeat financial statements for 1987 "fairly represented" its financial condition. A month later, the chief Arthur Young partner on the account was hired by Lincoln's parent company, Keating's American Continental Corp., which tripled his salary.

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