Accounting firm Ernst & Young falsified and tampered with key documents relating to its audit of Akai Holdings in the year the failed electronics giant collapsed, Akai's liquidator has claimed in court. In the first day of a six-month trial during which liquidator Borrelli Walsh is suing EY for up to US$1 billion, lawyers also alleged the accounting firm had relied on some questionable documents to defend its case. Akai was wound up in 2000, owing creditors US$1.1 billion. At its peak, the firm owned global consumer brands including America's Singer Sewing Machines and employed 100,000 staff. Founder James Ting (right) was imprisoned in 2005 for false accounting, although his conviction was overturned in 2007. The Big Four audit firm, which is being sued for negligence, says it cannot be held responsible for financial statements Ting said were true. The audit firm's barrister, Mark Hapgood, said yesterday EY 'emphatically' denied the allegations it doctored evidence. But Leslie Kosmin, for the liquidator, claimed computer experts had found at least 80 of EY's audit files from 1994 to 1998 were tampered with. He added that a group of EY's Akai files from 1994 to 1998 were modified by someone working for EY in January 2000. The judge, Mr Justice William Stone, was surprised by the liquidator's claims about EY's falsified evidence. He said 'crikey' at one point in yesterday's hearing, called the allegations 'a can of worms' and said he was 'obviously disturbed' by them. 'This is immense,' Kosmin said of the doctored file claims. The judge replied: 'I know.' Kosmin claimed EY back-annotated files from 1994 to 1998 to make it look like the firm's audit of Akai was better than it had been. 'It is Akai's case that there was virtually no audit work done at all and there should have been,' he said. Kosmin said the liquidator only discovered the allegedly doctored files last Friday afternoon, when EY provided original versions of key documents that it previously had only sent photocopies of. 'It was a bolt from the blue,' he said. Kosmin added that the doctored files had found their way into EY's witness statements and documents presented to the court. 'We have been misled,' he said. One document Kosmin claimed EY tampered with was crucial to the audit firm's defence. Edmund Dang, a senior member of EY's Akai audit team, swore in a witness statement that EY would not have allowed Akai's 1998 accounts to be published without having relied on a letter, signed by Ting, which stated the accounts were truthful. Auditors must wait for these so-called representation letters from clients before allowing their accounts to be published. But Kosmin claimed that Ting's 1998 representation letter was not even drafted until July 5, 1999, weeks after Akai published the financial statements on June 26. Additionally, he claimed the representation letter was modified by EY in January 2000. 'What this does do is it raises an implication. It's an implication that someone has created false audit documents,' Kosmin said. 'This taints [EY's] defence. If we are right, there has been a deliberate creation of a false audit trail.' The judge ruled all of EY's Akai files, disks and computers should be quarantined to prevent more potential tampering.