The UK's reporting regulator said it will investigate the accounting treatment of Repo transactions which were at the centre of professional negligence claims directed at Big Four firm Ernst & Young and their audit of collapsed bank Lehman Brothers.
The Financial Reporting Council said it would ascertain the facts "on how the 'Repo' transactions were accounted for and audited in the UK in order to determine any implications".
The board said it would speak with Ernst & Young, who last Thursday were accused of professional negligence, and failing to challenge Lehman Brothers' use of repo transactions in the years before its collapse.
The firm said at the time it stood by its audit decision. Yesterday it said it would "cooperate fully with all relevant parties on this matter".
Repo transactions are used by banks to swap assets for short term cash. Lehman Brothers was accused of using the transactions and the accounting treatment to artificially distort their balance sheet.
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.