FT.com / Companies / Banks - Lehman report blames top executives.
A one-year probe into the collapse of Lehman Brothers found “credible evidence” that top executives, including the former chief Dick Fuld, approved misleading financial statements and used an “accounting gimmick” to flatter results.
The long-awaited report by the court-appointed examiner Anton Valukas also said that there was enough evidence to claim that Ernst & Young, Lehman’s auditors, failed to “question and challenge improper or inadequate disclosures” in the firm’s results.
Now why aren't I surprised?
Did anyone really think people did not know what they were doing? And that they turned a blind eye whilst their own coffers over-flowed.
This was grand corruption.
It wasn't just in Lehman either.
Let's say it.
And let's say that restoring the system will perpetuate that corruption. Because it will.
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I hope I am not the only member of the ICAEW who is REALLY angry about this. I have read some of the comments from E&Y about their role in the collapse of Lehman and it makes my blood boil.
They claim that they were only responsible for providing an opinion on whether Lehman’s accounts complied with GAAP. Despite the fact that:
-Lehman were engaged in material misrepresentation of their liquid assets, which under IFRS should have been set aside based on the principle of substance over form.
-The window dressing nature of the transactions should have been caught by standard audit procedures to review cash movements around the period end.
-They received a tip off from a Lehman senior manager that this was happening – that they were duty bound to investigate (under the international standards on audit)
-They failed to report back to management on this issue (also an ISA requirement if material)
Clearly many staff at E&Y in London must have been aware of what was going on. but NOTHING was done. Despite a statutory duty to qualify the accounts and inform the board.
This is a terrible day for UK chartered accountants. I am personally questioning whether there is anyone left at the top of the profession who has any concept of integrity. We are all the poorer for what has transpired at E&Y. Frankly the E&Y Lehman partners and managers deserve to go to prison.