Ernst & Young faces Equitable legal action.

The law firm has been asked to see if the insurer could take legal action against those involved in the crisis over guaranteed annuity rates, and has the former auditor firmly in its sights.

Herbert Smith will also investigate the role played by the FSA, the DTI and Equitable's former executives who resigned over the crisis. The move came after the House of Commons Treasury Select Committee slammed the auditing arrangements at Equitable. Ernst & Young quit as auditor last month, saying it did so 'in order to help its client move forward.'

Equitable confirmed the move saying a number of member groups had pushed for the insurer to take action. A spokesman said: 'If there was any realistic chance of redress from any third party then we would pursue them.' An E&Y spokesman said: 'We do not believe there are any grounds for a legal claim and continue to believe the accounts were prepared properly.'

More on the Equitable audit at www.accountancyage.com /Public+Services/ 1120233.