On Monday, the Financial Reporting Council announced that it will investigate whether Lehman Brothers’ “Repo 105” transactions were audited correctly by Ernst & Young. According to the Telegraph, the FRC has asked Ernst & Young for more information about how the transactions were accounted for.
Lehman moved $50 billion of loans off its books by structuring a regular financing arrangement as an asset sale. The Telegraph reports that E&Y approved the “sale” under US GAAP, however a UK accountant stated that the transaction would not “fly” under international standards.
