NMC Health, a former FTSE 100 company, failed in 2020 after the discovery of billions of pounds in hidden debts. The company’s administrators, Alvarez & Marsal, are suing EY for approximately £2bn, alleging its auditors missed numerous “red flags” and were negligent in their work.

In the High Court this week, administrators claimed that EY partners led the Financial Reporting Council (FRC) to believe its auditors had full access to a complete list of NMC’s financial transactions. In reality, they could only view the data on a device controlled by NMC staff, Financial Times reports.

Lawyers for the administrators noted that an EY partner had already acknowledged during the trial that the information given to the FRC had been “incorrect and misleading,” though they accepted this could have been inadvertent.

Access to a company’s complete record of financial transactions is a crucial part of any audit. The court heard that EY staff internally described the NMC engagement as the UK’s “number one red label audit,” indicating its high-risk nature. A 2018 email from a lead auditor also revealed his scepticism over the “so-called technical barriers” that NMC staff cited as reasons for not providing a full data download.

EY, which was paid £14 million for its audits, denies negligence. The firm argues it should not be held responsible for a “concealed” fraud involving around 80 NMC staff who actively circumvented the audit process. EY is due to present its closing arguments this week.