The Financial Reporting Council (FRC) has decided to drop the investigation against members of the ICAEW and Ernst & Young over the audit of Lehman Brothers International (Europe).
Following the conclusion of the investigation, the FRC’s executive counsel, Gareth Rees QC, has decided that no action should be taken against E&Y or any individuals in connection with their conduct in this matter.
This matter was referred to an expert to consider the case. Following this, executive counsel decided that there was no realistic prospect that a tribunal would make an adverse finding against E&Y in the UK or members within that firm. The FRC has confirmed that the investigation will now be closed and no further action taken.
The scope of the FRC investigation covered the ‘conduct of members and a member firm in relation to the preparation of reports to the Financial Services Authority (FSA) in respect of Lehman Brothers International (Europe)’s compliance with the FSA’s client asset rules for the year ended 30 November 2007’.
The focus of the investigation was the audit by E&Y of Lehman Brothers International (Europe) and its compliance with the CASS rules. E&Y audited client money opt out arrangements, client classification and the segregation of client money post MiFID.
In the course of the investigation, the investigation team obtained and reviewed E&Y’s audit files and hard copy documentation. The team also interviewed E&Y audit team staff.
The Accountancy and Actuarial Discipline Board (AADB) started the investigation on 9 September 2010 and decided, pursuant to paragraph 5(8) of the AADB Accountancy Scheme, that the matter should be investigated.
Further details are available from the FRC.
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