Lehman Brothers Bankruptcy Case

Lehman Brothers Holdings Inc. was well-known as a global financial services firm. Lehman was the fourth-largest investment bank in the United States, doing business in investment banking, equity and fixed-income sales and trading (especially U.S. Treasury securities), research, investment management, private equity, and private banking. Lehman was operational for 158 years from its founding in 1850 until 2008 (Wikipedia).

On September 15, 2008, the firm filed for Chapter 11 bankruptcy protection, what went wrong within this big firm?

First, I found that Internal Control has not played the role of risk oriented audit. In the summer of 2007, the outbreak of the U.S. subprime mortgage crisis, Lehman brothers due to large holdings of mortgage-backed

Fraud is the focus of attention of the auditor, the audit team Ernst formulated corresponding standards according to the importance of changes in net leverage, such as the influence of "net leverage 0.1 or above, the amount of more than 18 billion" etc.. From the survey report of 2010 years, Lehman brothers using Repo 105 transactions "financial statements, hidden debt and manipulation of net leverage means has reached Ernst recognized the importance of projects, 2007 to 2008 years in during nearly 22007 years leverage rate amounted to 386 billion dollars 2008 years, the amount of up to 500 billion dollars, far more than the level of importance to determine the audit team. The annual report data for abnormal Lehman, Ernst & Young did not follow the relevant auditing standards and fulfill the corresponding audit procedures, the lack of occupation cautious in the audit process, the audit staff should have not keep questioning, eventually led to the Lehman brothers in the Ernst acquiescence issued financial statements misleading

According to Ernst audit agreement, the audit personnel should understand the major issues to management, especially when the informants are the key personnel audit clients and senior managers, should be more Ernst matter as a key concern. In accordance with the auditing standards, the financial statements fraud report, Ernst & young have occupation duty and communication with senior management and the audit committee, pointed out that the major or improper disclosure statements are refused to publish the audit report. In 2010 years Lehman's bankruptcy in the process of investigation, Ernst & young partner admitted that they know the years of Lehman "operation Repo 105" and its economic nature, but have taken an indifferent attitude. Ernst & Young turned a blind eye to Matthew Lee's report and failed to take appropriate auditing methods, which resulted in gross negligence and negligence and accelerated the failure of the