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The Lehman Brothers Bankruptcy D: The Role Of Ernst & Young, Rosalind Z. Wiggins, Rosalind L. Bennett, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy D: The Role Of Ernst & Young, Rosalind Z. Wiggins, Rosalind L. Bennett, Andrew Metrick

Journal of Financial Crises

For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s independent auditors to review its financial statements and express an opinion as to whether they fairly represented the company’s financial position. EY was supposed to try to detect fraud, determine whether a matter should be publicly disclosed, and communicate certain issues to Lehman’s Board audit committee. After Lehman filed for bankruptcy, it was discovered that the firm had employed questionable accounting with regard to an unorthodox financing transaction, Repo 105, which it used to make its results appear better than they ...


The Lehman Brothers Bankruptcy C: Managing The Balance Sheet Through The Use Of Repo 105, Rosalind Z. Wiggins, Andrew Metrick Mar 2019

The Lehman Brothers Bankruptcy C: Managing The Balance Sheet Through The Use Of Repo 105, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

The Lehman Brothers court-appointed bankruptcy examiner produced a 2,200-page report detailing possible claims that the estate might pursue. The most surprising revelation of the report was that during its last year Lehman had relied heavily on an unusual financing transaction—Repo 105. The examiner concluded that Lehman’s aggressive use of Repo 105 transactions enabled it to remove up to $50 billion of assets from its balance sheet at quarter-end and to manipulate its leverage ratio so that it could report more favorable results. This case considers in-depth Lehman’s questionable use of Repo 105 transactions and its impact.