E&Y is probed over Lehmans

A FULL-blown investigation into the conduct of Ernst & Young (E&Y) as auditors to fallen bank Lehman Brothers has been launched by the Accountancy and Actuarial Discipline Board (AADB).

The independent body, which sits under the Financial Reporting Coun­cil (FRC), said that it has started ­investigating the conduct of E&Y in “the preparation and audits of the financial statements of Lehman Brothers”.

A statement from the FRC said the AADB will also investigate the use of “Repo 105” and “Repo 108” transactions used by Lehman Brothers in the UK and Europe, which are believed to have been used by the bank to shift $50bn (£33.7bn) worth of debt off its balance sheet. E&Y said that it would co-operate fully with the AADB investigation but defended its position as auditor to Lehman Brothers.

A statement said: “E&Y’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.”

Ernst & Young was one of a number of professional bodies named in a damning report on the failing of Lehman Brothers, published in March.