Ernst & Young - FUBAR??

[Durruti]

Any E&Y Partners or employees want to comment?

http://www.zerohedge.com/article/deconstructingfun...


Oopsie....

[stigmundfreud]

be interesting to watch, considering the banks have just been working with E&Y on an industry wide standard for info sec questions/standards

[Zod]

Not entirely comfortable for Linklaters either.

Edited by Zod on Monday 15th March 10:09

[JagLover]

I am in no way qualified to comment on the audit of a financial services company but their comments about the partner in overall charge of that audit are laughable. There would be a manager in charge of that audit under her. Many senior partners I know are sem-retired, or are pursuing other business interests as well. That doesn't mean that any audits they are responsible for are not being carried out correctly.

[Eric Mc]

When things go bad, the cry of "Where were the auditors?" is always to be heard.

Ask any former partners of Arthur Andersen.

[stigmundfreud]

Arthur Andersen, funnily enough I was working for Exodus at the time they went tits up which was in short due to some very exotic deals that AA, Exodus and Gobal Crossing had come up with. Actually to be fair to GC they were taken up the backside by our purchase

if EY do go tits up considering how intertwined they are in our financial services this could prove very damaging for the city and the markets

[Muncher]

It's not looking good for E&Y and Linklaters will certainly take some flack for this.

I'm wondering what will be worse, the reputational damage or the claims from investors...

[FUBAR]

[mrmr96]

FUBAR said:

Come clean. What was your involvment?

[mcdjl]

Not being in the financial industry...what does that mean/whats happened? Or is the answer far too complex for me to understand?

[FourWheelDrift]

mcdjl said:

Not being in the financial industry...what does that mean/whats happened? Or is the answer far too complex for me to understand?

As part of the bankruptcy investigation into Lehman Brothers it has been found that they engaged in a practice known as Repo 105 which is where short term loans are classified as sales, Ernst & Young are "allegedly" accused of being aware of it, much mud is being slung between people and even more finger pointing.

Repo 105 - The cash obtained through this "sale" is then used to pay down debt, allowing the company to appear to reduce its leverage by temporarily paying down liabilities—just long enough to reflect on the company's published balance sheet. After the company's financial reports are published, the company borrows cash and repurchases back its original assets.

[Muncher]

It's the equivalent of hiding your copy of Razzle down the back of the sofa when your Mum comes round.

[hidetheelephants]

FourWheelDrift said:

mcdjl said:

Not being in the financial industry...what does that mean/whats happened? Or is the answer far too complex for me to understand?

As part of the bankruptcy investigation into Lehman Brothers it has been found that they engaged in a practice known as Repo 105 which is where short term loans are classified as sales, Ernst & Young are "allegedly" accused of being aware of it, much mud is being slung between people and even more finger pointing.

Repo 105 - The cash obtained through this "sale" is then used to pay down debt, allowing the company to appear to reduce its leverage by temporarily paying down liabilities—just long enough to reflect on the company's published balance sheet. After the company's financial reports are published, the company borrows cash and repurchases back its original assets.

OT, but in a nutshell that sums up for me all that was/is wrong about banking; by all means risk shareholders cash doing this arcane financial sophistry, but joe taxpayer should not be there to hold your hand when it goes tits up, and as a corollary of this retail and corporate banking should be separated.

[Eric Mc]

If somebody gives you money there can be only two major conditions attached to that transaction-

keep it

or

give it back

If you can keep it, it becomes income.

If you have to give it back, it's not income, it's a loan.

Lehamns were treating loans as income.

[FarleyRusk]

Eric Mc said:

When things go bad, the cry of "Shred the evidence!" is always to be heard.

Ask any former partners of Arthur Andersen.

EFA

[mcdjl]

That manages to sound straight forward...but yet completely wrong to me. Maybe thats why I'm not in banking/accountancy etc....

[skwdenyer]

FourWheelDrift said:

mcdjl said:

Not being in the financial industry...what does that mean/whats happened? Or is the answer far too complex for me to understand?

As part of the bankruptcy investigation into Lehman Brothers it has been found that they engaged in a practice known as Repo 105 which is where short term loans are classified as sales, Ernst & Young are "allegedly" accused of being aware of it, much mud is being slung between people and even more finger pointing.

Repo 105 - The cash obtained through this "sale" is then used to pay down debt, allowing the company to appear to reduce its leverage by temporarily paying down liabilities—just long enough to reflect on the company's published balance sheet. After the company's financial reports are published, the company borrows cash and repurchases back its original assets.

I thought that the issue was the assets (i.e. loans made to other entities) were being removed from Lehman's balance sheet by this practice, allowing it to report lower assets and, therefore, better capital ratios.

[FourWheelDrift]

Lehman Brothers were swapping their assets (loans & bonds) for hard cash, Lehman could then give the impression to investors, rating agencies, financial regulators and even the company’s own board of directors that it had reduced its lending and so had cut the amount of risk it was taking.