Lehman Bros Ernst&Young Audit
Lehman Brothers 2008
Auditing Final Project
Mariya Zdravkova MIAF 2011, IE
Table of Content: 1. Company Introduction……………………………………………………..…………………………………….3 2. Collapse……………………………………………………………………………………..…………………………..3 3. The Report of Anton R. Valukas…………………………………………..……….…………………………3 4. The accounting fraud (Repo 105)…………………………………………………...……………………….3 5. The Auditor……………………………………………………………………………………………..……………..4 6. Ernst and Young role in Lehman Brothers´ case……………………………………………………….4 7. The “Netting Grid”……………………………………………………………………………….………………….5 8. Materiality issue…………………………………………………………………………….……………………….5 9. Fraud charges…………………………………………………………………………………………………….6 10. Conclusion…………………………………………………………………………………………………………6
Sources……………………………………………………………………………………………………………………7
1. Company Introduction. Lehman Brothers was a company with a long and interesting history. It was founded in 1850 as a family business, by three brothers who immigrated to the US, and started as a shop, which later entered trading with cotton. Eight years later it opened its office in New York. During the more than 150 years existence the company became the fourth largest financial firm in the world. Before announcing bankruptcy on 15th of September 2008, they were providing full range of financial services. The head quarter of the company was in New York, and there were two regional headquarters in London and Tokyo. In 1984 Lehman Brother was acquired by American Express. Ten years later they went public again as an independent company under the name Lehman Brothers Holding, Inc.
2. Collapse. The first problems, which probably led to the accounting fraud, Lehman faced in August 2007. The mortgage crisis strongly affected them, resulting in huge losses. They had to close their subprime lender department, which led to after-tax charges of $25 million and also a reduction in their balance sheet – $27 millions of Good Will. In 2008 they continue
Auditing Final Project
Mariya Zdravkova MIAF 2011, IE
Table of Content: 1. Company Introduction……………………………………………………..…………………………………….3 2. Collapse……………………………………………………………………………………..…………………………..3 3. The Report of Anton R. Valukas…………………………………………..……….…………………………3 4. The accounting fraud (Repo 105)…………………………………………………...……………………….3 5. The Auditor……………………………………………………………………………………………..……………..4 6. Ernst and Young role in Lehman Brothers´ case……………………………………………………….4 7. The “Netting Grid”……………………………………………………………………………….………………….5 8. Materiality issue…………………………………………………………………………….……………………….5 9. Fraud charges…………………………………………………………………………………………………….6 10. Conclusion…………………………………………………………………………………………………………6
Sources……………………………………………………………………………………………………………………7
1. Company Introduction. Lehman Brothers was a company with a long and interesting history. It was founded in 1850 as a family business, by three brothers who immigrated to the US, and started as a shop, which later entered trading with cotton. Eight years later it opened its office in New York. During the more than 150 years existence the company became the fourth largest financial firm in the world. Before announcing bankruptcy on 15th of September 2008, they were providing full range of financial services. The head quarter of the company was in New York, and there were two regional headquarters in London and Tokyo. In 1984 Lehman Brother was acquired by American Express. Ten years later they went public again as an independent company under the name Lehman Brothers Holding, Inc.
2. Collapse. The first problems, which probably led to the accounting fraud, Lehman faced in August 2007. The mortgage crisis strongly affected them, resulting in huge losses. They had to close their subprime lender department, which led to after-tax charges of $25 million and also a reduction in their balance sheet – $27 millions of Good Will. In 2008 they continue