The accounting firm that reviewed Feltex's financial statements said it did not know the carpet-maker was in breach of its loan with ANZ because the company said it had the bank's "full support".

Ernst & Young's review of the statements for the six-month period to December 31, 2005, were discussed in detail at the Auckland District Court yesterday.

Feltex's five directors are in court defending allegations the company's half-year accounts to December 31, 2005, did not disclose it was in breach of its loan agreement with ANZ.

The directors, Tim Saunders, John Feeney, Peter David Hunter, Peter Thomas and John Hagen, each face two charges under the Financial Reporting Act for allegedly failing to disclose proper financial records for the six-months to December 31, 2005. They have pleaded not guilty.

Defence lawyer, Alan Galbraith, QC, said Ernst & Young had "clearly got it [the review] wrong".

The directors say if they had been aware the records had not met required standards, they would have done everything in their power to ensure the records were compliant.

Feltex paid Ernst & Young A$25,000 ($33,000) to conduct the review of its financial statements for that period. The trial continues.

Further details are available at nzherald.co.nz.