Saturday, March 13, 2010

Learning from Lehman

Even if there are never any criminal prosecutions or civil awards related the collapse of Lehman Brothers, one thing is clear from the recently released bankruptcy court examiner's report.

From Enron to Lehman, corporate financial reporting, accounting, and auditing has suffered what can only be called a lost decade in which the industry learned nothing from its own mistakes.

Real Time Economics is featuring excerpts of the report:

"Colorable claims exist that Ernst & Young did not meet professional standards, both in investigating Lee's allegations and in connection with its audit and review of Lehman's financial statements."

--From the report, executive summary, page 21

"[W]e are also dealing with a whistleblower letter, that is on its face pretty ugly and will take us a significant amount of time to get through. I am confident from what I have seen it shouldn't result in any significant issues around financial reporting, but again there is a lot of work to do yet. This combined with some very difficult accounting issues around off balance sheet items is adding stress to everyone." (From a June 8, 2008, email from William Schlich, a former lead partner on Ernst & Young's Lehman team)

--From the report: Volume 3, page 961

1 comment:

Dad29 said...

I'm sure you've heard about Arthur Anderson's invention called "EBITDA"

That's Earnings Before Indictment, Trial, Disposition, And (prison.)

Yup. I'd say that E&Y is in a very nasty patch.