the office of PricewaterhouseCoopers (PWC)
An office of PricewaterhouseCoopers (PWC)

Troubled Irish company Quinn Insurance's administrators are suing accounting firm PricewaterhouseCoopers for negligent auditing that had allegedly resulted in significant losses for the insurer.

The two administrators, Michael McAteer and Paul McCann, from accountancy firm Grant Thornton said that PwC did not highlight deficiencies in Quinn's company accounts.

They also allege that PwC failed between 2005 and 2008 to notify either the Quinn board or the financial regulatory authorities of the insurer's failure to hold a certain level of reserves required for non-life insurance companies.

They are seeking damages amounting to €1bn ($1.3bn, £863m) from PwC, which was the insurance company's auditor from 1996 until its dismissal in 2010 by the administrators.

"The defendant failed to appreciate the significance and implications of the deficiencies and weaknesses which it did discover and did not adequately review and where appropriate interrogate the plaintiffs' own assessment," McAteer said in court documents.

He added that any possible damages awarded in the lawsuit would be used to repay some of Quinn's debts to the state.

Quinn, founded by former billionaire Sean Quinn, was put into administration in 2010 after Ireland's financial regulator found that the insurer did not adhere to stict solvency requirements.

Ireland, which itself is struggling from an €85bn bailout obligation to the European Union and the International Monetary Fund and widespread austerity measures, had earlier imposed levies on all insurance holders to bail out Quinn.

The Irish government had pumped €1.1bn into the insurance company to keep it afloat.

US general insurer Liberty Mutual bought a 51% stake in Quinn two years ago and rebranded it as Liberty Insurance. The remaining 49% in the insurer is owned by the Irish state.

PwC Defends Allegations

PwC, one of the world's "Big Four" accountancy firms, denied the allegations.

"These proceedings are unjustified and devoid of merit. The affidavit, accompanying the application, contains factual inaccuracies, misrepresentations of the facts and assertions with which we fundamentally disagree," it said in a statement.

The auditor was earlier criticised by US regulator of corporate auditors for not doing enough work to ensure its audits were carried out in a proper manner.

The news comes just hours after one of the other 'Big Four' faces a £20m fine for failing to manage the conflicts of interest created by its role as the advisers to MG Rover.

The Financial Reporting Council's tribunal dismissed an appeal by Deloitte against an earlier ruling and is pressing for a civil penalty, as well as the suspension of Maghsoud Einollahi, a partner at the firm who was involved in the deal.