Lehmans: What the papers say

A root and branch review of the audit profession is required, the weekend papers have reported, after criticism of Ernst & Young's audit of Lehman Brothers.

The Guardian reported that MPs want a review of how the audit industry works, plus consideration of the non-audit consultancy work they undertake for clients.

Tory MP Michael Fallon said a "fresh approach" was needed that revealed risky practices by banks.

Lib Dem Treasury spokesman Lord Oakeshott said banning audit firms from accepting additional consultancy work was a starting point to cleaning up the profession.

The report into the collapse of Lehmans alleged that the bank used legal accounting practices to help misrepresent the financial position of the company.

It also questions whether auditors Ernst & Young were professionally negligent over their acceptance of Lehmans use of accounting rules, which saw $50bn of debts kept off the balance sheet.

The FT said that the report would bring auditors' role back into the spotlight – but the fallout shouldn't damage E&Y irrevocably.

The Daily Mail's Simon Watkins wrote: "This weekend E&Y is far from finished, but it is safe to say that the Valukas report has left its stunned."

Further reading:

Lehman administrators consider damning report

E &Y "negligent" in Lehman audits, report claims

Report claims E&Y knew about Repo transactions

Lehman CFOs were warned of "reputational risk" of transactions