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To: SteveF who wrote (4767)	1/29/2011 10:54:04 AM
From: scion	Respond to of 53574

Ernst & Young LLP July 2, 2010 pcaobus.org Firm Inspection Reports pcaobus.org A. Review of Audit Engagements The scope of the inspection procedures performed included reviews of aspects of 58 audits performed by the Firm. The scope of this review was determined according to the Board's criteria, and the Firm was not allowed an opportunity to limit or influence the scope. In reviewing the audits, the inspection team identified matters that it considered to be audit deficiencies.5/ Those deficiencies included a failure by the Firm to identify or appropriately address an error in the issuer's application of GAAP. In addition, the deficiencies included failures by the Firm to perform, or to perform sufficiently, certain necessary audit procedures. In some cases, the conclusion that the Firm failed to perform a procedure may be based on the absence of documentation and the absence of persuasive other evidence, even if the Firm claims to have performed the procedure. PCAOB Auditing Standard No. 3, Audit Documentation ("AS No. 3") provides that, in various circumstances including PCAOB inspections, a firm that has not adequately documented that it performed a procedure, obtained evidence, or reached an appropriate conclusion must demonstrate with persuasive other evidence that it did so, and that oral assertions and explanations alone do not constitute persuasive other evidence.6/ For purposes of the inspection, an observation that the Firm did not perform a procedure, obtain evidence, or reach an appropriate conclusion may be based on the absence of such documentation and the absence of persuasive other evidence. When audit deficiencies are identified after the date of the audit report, PCAOB standards require a firm to take appropriate actions to assess the importance of the deficiencies to the firm's present ability to support its previously expressed opinions,7/ 5/ The discussion in this report of any deficiency observed in a particular audit reflects information reported to the Board by the inspection team and does not reflect any determination by the Board as to whether the Firm has engaged in any conduct for which it could be sanctioned through the Board's disciplinary process. 6/ See AS No. 3, paragraph 9; Appendix A to AS No. 3, paragraph A28. 7/ See AU 390, Consideration of Omitted Procedures After the Report Date, AU 561, Subsequent Discovery of Facts Existing at the Date of the Auditor's Report PCAOB Release No. 104-2010-091 Inspection of Ernst & Young LLP July 2, 2010 Page 4 and failure to take such actions could be a basis for Board disciplinary sanctions. In response to the inspection team's identification of deficiencies, the Firm, in some cases, performed additional procedures or supplemented its work papers.8/ In some cases, the deficiencies identified were of such significance that it appeared to the inspection team that the Firm, at the time it issued its audit report, had not obtained sufficient competent evidential matter to support its opinion on the issuer's financial statements or internal control over financial reporting ("ICFR"). The deficiencies that reached this degree of significance are described below, on an audit-by-audit basis. pcaobus.org

To: SteveF who wrote (4767)	1/29/2011 11:20:06 AM
From: scion	Read Replies (2) \| Respond to of 53574

Ernst & Young sued in US over Lehman collapse 22 December 2010 Last updated at 12:10 bbc.co.uk Lehman Brothers was the first major bank to collapse during the financial crisis in 2008 Accountancy giant Ernst & Young has been sued by New York's attorney general over its role in the collapse of Lehman Brothers during the financial crisis in 2008. Andrew Cuomo claimed the firm was complicit in a "massive accounting fraud" perpetrated by Lehman. Ernst & Young said that it would "vigorously defend" itself. "There is no factual or legal basis for a claim to be brought against an auditor in this context," it said. "Lehman's audited financial statements clearly portrayed Lehman as a highly leveraged entity operating in a risky and volatile industry." Settlement Mr Cuomo takes a different view. "At a time when it was critical for investors to make informed decisions as to whether to keep or to buy Lehman, Ernst & Young assisted Lehman in defrauding the public," the lawsuit clams. The case centres on Lehman's use of an accountancy practice known as Repo 105, which involves temporarily removing money from the balance sheet to give the impression of greater financial strength. The lawsuit claims that as much as $50bn (£32bn) was parked temporarily overseas. As Lehman's auditors, Mr Cuomo asserts, Ernst & Young should not have approved the accounts, knowing that the practice had been used so widely. Observers suggested the two parties may settle out of court, rather than enter a long and expensive court battle. "It tends to be a lot less expensive for both parties to resolve it through settling and getting it behind them," said Bruce Pounder at US firm Leveraged Logic. Lehman Brothers was the first major bank to collapse as part of the global financial crisis in September 2008. bbc.co.uk New York AG Sues Ernst And Young December 22, 2010 This week, the attorney general of New York state sued the accounting firm Ernst and Young — the same firm that audited Lehman Brothers. NPR's Robert Siegel speaks with Columbia law professor John Coffee about the suit. [...] More npr.org