EY’s legal provisions balloon 300 per cent as audit battles mount
Big Four giant EY has reported a surge of over 300 per cent in its legal provisions, as the firm grapples with the fallout of high-profile audit failures and regulatory crackdowns.
According to the firm’s latest results on Companies House, EY didn’t just add a small buffer; it added £188m in new claims-related charges in a single year, bringing its total claims provision to £184m.
At the beginning of the 2025 period, the provision for claims stood at £44m, but the firm added £188m in new/increased provisions specifically for claims during the year.
The Big Four firm paid out £48m in cash related to these claims during the period, resulting in its ‘at end of period’ balance for claims to stand at £184m.
These provisions apply to “alleged professional negligence claims or regulatory matters” where the firm judges that a payment is probable and can be reliably estimated.
At the time of its report, which ran up to 27 June 2025, the firm was facing a £2.4bn lawsuit by NMC Health plc’s administrators.
EY was accused by the administrators, Alvarez & Marsal, of providing an unqualified audit opinion for the collapsed private hospital operator, a claim the firm denied.
The case was settled before ruling
The case went to trial in May before Dame Clare Moulder and ran for 15 weeks; however, just before a judgment was set to be handed down, EY reached a “confidential agreement” to settle the case for an undisclosed figure.
The case was settled after its 2025 accounts were recorded.
Elsewhere, EY (like the rest of the Big Four) was hit with fines in 2025 by the accountancy regulator. This included a £6.5m penalty for the Thomas Cook audit failure and a £500,000 fine regarding a Scottish water company audit.
The Companies House report noted that, to the extent a claim is covered by insurance, EY’s professional indemnity insurance is primarily written through its captive insurance company, a wholly owned subsidiary established by a parent company to insure its own risks and those of its affiliates, serving as a form of self-insurance.
While a proportion of the total cover provided by the captive is then “reinsured through the commercial market”. The firm said it is responsible for an initial “insurance deductible” before the insurance coverage kicks in.