Lehman Brothers auditors to face second investigation

6 October 2010

Ernst & Young (E&Y) is to face a second investigation into its auditing of failed bank Lehman Brothers.

The Accountancy & Actuarial Discipline Board (AADB) announced details of the probe while also revealing it is to analyse the auditing work of PriceWaterhouseCoopers (PwC) undertaken on behalf of JPMorgan.

In a statement, the AADB said it will focus on “the conduct of Ernst & Young LLP in relation to the preparation of a report to the Financial Services Authority (FSA) in respect of Lehman Brothers International (Europe)’s compliance with the FSA’s Client Asset Rules for the year ended November 30th 2007”.

The investigation is expected to go through the advice provided to the two banks surrounding the segregation of client funds from its own capital.

Representatives from both PwC and E&Y have confirmed that the auditing firms are both cooperating fully with investigators.

The AADB stated that independent tribunals are expected to be held following the separate investigations.

Earlier in the year, the Financial Services Authority (FSA) levied its largest ever fine on JPMorgan Securities for failing to keep client funds separate from its own.

The financial services provider was asked to pay a record £33.32 million for errors surrounding the segregation of capital.

By Jim Ottewill

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