Feltex auditors believed breach had been waived
Feltex's auditor Ernst & Young didn't question omission of breached banking covenants in the carpet maker's half-year result because it believed they had been waived.Ernst & Young Australian partner Stuart Painter told the Auckland District Court
Wed, 21 Apr 2010
Feltex’s auditor Ernst & Young didn’t question omission of breached banking covenants in the carpet maker's half-year result because it believed they had been waived.
Ernst & Young Australian partner Stuart Painter told the Auckland District Court today this was the reason it did not instruct directors to disclose the breach of the lending arrangements with ANZ Bank in the company's December 2005 half-year accounts.
“All evidence we collected at the time suggested there was a waiver,” he told the court.
Mr Painter, who was called in as a prosecution witness in the case, said that evidence was found in board minutes, a management representation letter and the chairman’s statement at a meeting of shareholders.
Feltex went into receivership in September 2006 with debts of more than $40 million.
The directors, including former chairman Tim Saunders and former chief executive Peter Thomas, are defending charges of failure to disclose a breach of banking covenants in the December 2005 half-year accounts and failure to classify debt to the ANZ Bank as a current liability.
The Feltex directors have claimed they relied on the advice of Ernst & Young auditors that the financial statements for the half-year complied with the appropriate accounting standards – NZ IFRS.
Wed, 21 Apr 2010
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