U.K. Investigates Ernst & Young’s Lehman Audit

Submitted by Jorina Fontelera on Wed, 06/16/2010 - 11:10

The Accountancy and Actuarial Disciplinary Board (AADB), Britain’s governing body over accounting, has launched an inquiry over allegations that Ernst & Young approved tactics that allowed Lehman Brothers to hide $50 billion of debt of its books.

The investigation was triggered by a March report, released by U.S. court-appointed bankruptcy examiner Anton Valukas, that found a repurchase/resale transaction called “Repo 105” was used to hide how much the failed investment bank had borrowed. Along with “Repo 105,” the AADB is looking into “Repo 108s,” which it said were regularly used in Lehman’s quarter-end balance sheets. It also is examining E&Y's last audit of Lehman’s U.S. and U.K. operations for the fiscal year ending November 30, 2007, The Financial Times reports.

According to the Guardian, the Financial Reporting Council has asked E&Y for more details and documents regarding “Repo 105s” and “Repo 108s.” If negligence is found, E&Y could face a wave of lawsuits, penalties and loss of licenses and practicing certificates for individuals involved.

E&Y told the Guardian that it plans to cooperate in the investigation and reiterated it was not guilty of any wrongdoing.
 

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