The auditors of the suspended EEA traded life settlement fund has said the fund is worth $100m less than the value recorded in the company's financial statements.
The fund was suspended on 30 November 2011 due to "unprecedented" levels of redemption requests after the regulator announced that it would seek to ban the sale and marketing of traded life policy investments to retail investors - which it did this year.
EEA has only just published its accounts for the year ending 31 December 2011 - a year late - in which Ernst & Young, the fund's auditors, give a damning report.
The auditors state that they "were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion".
Ernst & Young go on to say that it "disagreed" with EEA directors' valuation of investments in life policies and considered the audit evidence available to it with respect to pricing was "limited".
EEA's directors put the value of the life settlement fund at $871m - Ernst & Young said the maximum "reasonable value" that could be attributed to the investments in life policies at 31 December 2011 is $100m less.
Ernst & Young's assessment would give rise to a deferred tax liability of approximately £35m and accordingly the auditors consider that EEA's profit and net assets are "overstated by at least $65m".
The auditors also criticised EEA's directors for failing to adjust their net asset valuation (NAV) methodology, saying as a result that they have been unable to form an opinion as to whether NAV based fees, including management fees and performance fees were calculated properly.
The fund is likely to remain suspended until a restructuring is completed, the directors said.
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