WSJ:
LONDON—The U.K.'s Financial Reporting Council, the regulator for accounting and auditing, said Monday it had started looking at how Lehman Brothers Holdings Inc. repo transactions were accounted for and audited in the U.K. It said it was seeking extra information from Lehman's former auditor, Ernst & Young.
The move follows a report by the bankruptcy examiner for Lehman last week that said there may be sufficient evidence to support claims of negligence and malpractice against Ernst & Young over the repo transactions, which allowed Lehman to move $50 billion off its books and make it appear stronger than it was.
The FRC said it wanted to "ascertain the facts" and it wanted to "determine any implications."
"At this stage, we are just establishing whether any U.K.-based companies or individuals are implicated in the report," an FRC spokesman said.
Both Lehman and Ernst & Young have U.K. subsidiaries, and the report also refers to a U.K. legal opinion from London-based law firm Linklaters, he added.
Ernst & Young said it was cooperating "with all relevant parties on this matter." The FRC is responsible for licensing auditors within the U.K. and can refer any individuals or companies to the accounting discipline board.
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