The firm was responding to allegations in a report by Anton Valukas, US bankruptcy examiner, accusing it of poor practice which disguised the full extent of the bankâs financial difficulties.
Mr Valukasâ report, which is more than 2,000 pages long and took a year to compile, claimed that âaccounting gimmickâ Repo 105 was used by the bank and E&Y to move assets to other financial institutions for a short period to shore up its balance sheet at the end of each quarter.
Up to $50 billion worth of investments is thought to have been hidden from regulators, the report claimed.
However, E&Y explained that the use of Repo 105 was common practice among financial institutions.
âAll investment banks used repo transactions extensively to fund their operations on a daily basis; these banks all operated in a high-risk, high-leverage business model. Most repo transactions are accounted for as financings.â
In the letter, E&Y continued: âLehman's bankruptcy was the result of a series of unprecedented adverse events in the financial markets. [Its] bankruptcy was caused by a collapse in its liquidity, which was, in turn, caused by declining asset values and loss of market confidence in Lehman.
âIt was not caused by accounting issues or disclosure issues."
The auditing firm also said that the collapse of Lehman Brothers in September 2008 prevented it from investigating claims of accounting irregularities made by Matthew Lee, senior vice-president at the firm.