(Bloomberg) -- The U.K.'s Financial Reporting Council has opened an investigation into Ernst & Young LLP's auditing of NMC Health Plc, the Middle Eastern hospital operator facing fraud allegations.
The regulator's enforcement division will investigate the company's 2018 financial statements, it said in a statement Monday. The probe started April 15 and could result in sanctions such as fines.
NMC, founded by Indian entrepreneur Bavaguthu Raghuram Shetty, is being run by administrators after succumbing to creditor demands. Trading in the London-listed hospital chain, which had a market value of $10 billion at its peak, was suspended in February amid allegations of fraud. It has revealed more than $4 billion of undisclosed borrowings, pushing its total debt to $6.6 billion.
Ernst & Young and the other three large accounting firms have been criticized by U.K. regulators for sloppy audit work and perceived conflicts of interest, which have prompted parliamentary calls for them to split up their consulting and auditing arms. In July, the U.K. accounting regulator said it had issued record fines of 42.9 million pounds ($53.6 million) in the previous 12 months.
Just last month, Ernst & Young was told to pay $10.8 million to an auditor who blew the whistle on wrongdoing at a Dubai gold refiner.
NMC's founder Shetty has said he is a victim of fraud, including the creation of unauthorized bank accounts in his name. His business empire is under scrutiny beyond NMC. Finablr Plc, the embattled owner of two foreign-exchange businesses, uncovered about $1 billion of debt hidden from its board that may have been used for purposes outside of the company.
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