ERNST & Young (E&Y) has said it will co-operate fully with the Financial Reporting Council (FRC) after it was asked to hand over audit information in relation to Lehman Brothers in the UK.
The professional services firm was asked yesterday by the FRC to hand over any audit information regarding Lehman Brothers so it could determine how controversial Repo 105 transactions were accounted for and audited.
The transactions allowed Lehman Brothers to shift $50bn (£32.8bn) in debt off its balance sheet in early 2008, it is alleged, making the bank appear healthier than it was.
The FRC said: “We have asked Ernst & Young to provide further information in relation to what happened in the UK.”
A spokesperson from E&Y said it would work with all related parties on the matter.
The FRC’s request is in response to last week’s US court-appointed report on the failings of Lehman Brothers.
The 2,200 page report issued late last week by Anton Valukas, chairman of US law firm Jenner & Block, alleged that E&Y, which was appointed as auditor of the bank, did not meet professional standards after reviewing the bank’s value of the Repo 105 transactions.
Valukas also named UK commercial law firm Linklaters, which signed off on advice regarding the Repo 105 transactions.
London finance partner Simon Firth led the advice on the transactions for the firm.
Linklaters said it had reviewed the opinions it gave and was not aware of any facts that would justify criticism. The firm has not taken disciplinary action against Firth.
Shadow Chancellor George Osborne criticised the Financial Services Authority yesterday for not taking a “big picture view” on Lehman Brothers and not intervening.