Ernst & Young faces new investigation over Lehman audit

Deputy Editor
Sift Media
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Disciplinary body launches probe into the firm’s audit of Lehman Brothers, including the use of so-called ‘accounting gimmicks’.

The Accountancy and Actuarial Disciplinary Board (AADB) announced that it had begun an investigation into the conduct of Ernst & Young LLP as auditors to the now collapsed bank.

A recent US court examiner’s report accused senior management of “actionable balance sheet manipulation” and using “accounting gimmicks” to cover up the failing bank’s losses.

The bank employed offbalance sheet devices, known within Lehman as Repo 105 and Repo 108 transactions, to temporarily remove securities inventory from its balance sheet, a tactic which was used to create a “a materially misleading picture of the f...

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