The Royal Commission investigating the collapse of Australian insurer HIH last March revealed that directors and officers failed to provide essential information to the accounting firm Ernst & Young which prevented them from reviewing its financial condition, and also from ascertaining that HIH had allegedly ceased paying claims while it tried to negotiate deals with other insurers to take over its business.
In testimony so far this week the commission heard that Ernst & Young, who had been appointed in November 2000 to conduct a special audit of HIH at the request of Westpac, one of its major backers, weren’t given access to the books and records of individual companies within the group, and were therefore unable to form an opinion as to HIH’s solvency.
The lack of information prevented Ernst & Young from conducting as full an investigation as had been requested, and left many questions unanswered. Among the most serious deficiencies are allegations that HIH ceased paying Australian claims, while it pursued negotiations with various companies to take over portions of its business.
Further hearings are scheduled.
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