Published on Sat, Mar 13, 2010 at 14:12 | Source : Reuters
Updated at Sat, Mar 13, 2010 at 16:04
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Could Lehman be Ernst & Young`s Enron?
Ever since the fraud at US energy trader Enron Corp brought down accounting firm Arthur Andersen eight years ago, global auditing firms have worried that a major misstep could be fatal
"They are going to say, hey, we got hoodwinked like everybody else," Sabino said. "They've got defences. For the directors and the officers, they're in a much tougher spot."
But most troubling for the auditors could be allegations in the examiner's report that Ernst & Young did not inform the audit committee on Lehman's board about a whistleblower who had expressed concerns about the repos to them.
For Ernst & Young, the firm has previously faced similar allegations that it failed to notify a board of directors when it discovered potential problems in a tangle with US securities regulators over its audits of health club operator Bally Total Fitness.
In December, the Big Four firm agreed to pay the US Securities and Exchange Commission an $8.5 million fine, one of the highest settlements ever paid by an accounting firm.
Fines are not the only cost the firm might face, however. "If nothing else, it's perception - this is going to cost them a whole lot in legal fees, and it's damaging to their reputation," Sabino said.
