Bloomberg (December 22)
Just weeks before being sued for its role as auditor of Lehman Brothers, Ernst & Young (E&Y) was advertising that it could help companies identify “new risks related to fraud and corruption.” A Bloomberg editorial agrees that “E&Y may have lots of experience in this field,” but adds it’s the wrong kind of experience. “It’s indisputable that E&Y blessed Lehman’s financial statements quarter after quarter, year after year, falsehoods and all.” The problem is all of the large audit firms have had the wrong kind of experience. “Killing E&Y or any of the other Big Four audit firms — PricewaterhouseCoopers LLP, Deloitte & Touche LLP and KPMG LLP — would leave just three large survivors, when the industry has too few competitors already.”
Tags: Big Four, Ernst & Young, Fraud, Lehman
Businessweek (December 21)Businessweek (December 21)
Ernst & Young LLP is being sued by New York Attorney General Andrew Cuomo for enabling Lehman Brothers to engage in a major accounting fraud designed to deceive investors. Lehman routinely moved liabilities off balance sheet for a period of over 7 years while Ernst & Young was its public auditor. Through what became known as “Repo 105” transactions, Lehman would sell debt before reporting dates with an agreement to repurchase the debt afterwards. As much as $50 billion was hidden from view through this window-dressing tactic. According to Cuomo, who will soon step aside as Attorney General to become New York’s Governor, “This practice was a house-of-cards business model designed to hide billions in liabilities in the years before Lehman collapsed.”
Ernst & Young LLP is being sued by New York Attorney General Andrew Cuomo for enabling Lehman Brothers to engage in a major accounting fraud designed to deceive investors. Lehman routinely moved liabilities off balance sheet for a period of over 7 years while Ernst & Young was its public auditor. Through what became known as “Repo 105” transactions, Lehman would sell debt before reporting dates with an agreement to repurchase the debt afterwards. As much as $50 billion was hidden from view through this window-dressing tactic. According to Cuomo, who will soon step aside as Attorney General to become New York’s Governor, “This practice was a house-of-cards business model designed to hide billions in liabilities in the years before Lehman collapsed.”
Tags: Accounting, Audit, Cuomo, Ernst & Young, Fraud, Lehman
