Ernst And Young Audit Of Lehman Brothers Under Investigation

Thu, 17 Jun 2010

Accountancy firm Ernst and Young is being investigated over its audit of collapsed US investment bank Lehman Brothers.

The Accountancy and Actuarial Discipline Board (AADB), which investigates high profile cases in the accountancy industry, said it would look into Lehman's financial statements to determine whether its books were properly audited by E&Y in the months leading up to the bank’s collapse.

The investigation will also look into the use of controversial accounting practises known as Repo 105 and Repo 108, which critics claim allowed Lehman Brothers to exaggerate its financial strength by concealing some $50bn (£33bn) of loans from its balance sheet.

E&Y said it would fully cooperate with the AADB's investigation.

In a statement, the company said: "Ernst and Young’s audit opinion stated that Lehman's financial statements for that year were fairly presented in accordance with the relevant accounting standards, and we remain of that view."

Earlier this year, Anton Valukas – the US lawyer and examiner in charge of the inquest into the downfall of Lehamn Brothers – said there was sufficient evidence to support a possible claim that Ernst and Young had been "negligent", and that Lehman's liquidators could pursue claims against the firm for "professional malpractice".

Ernst and Young refuted the claims and said it was confident it would prevail should any of the potential claims identified against them be pursued.
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