Ernst & Young's Role In Lehman's Repo 105 Scandel Probed

Ernst & Young is continuing to see pressure from federal regulators for the accounting firm's role in the bankruptcy of Lehman Brothers’ as an oversight board created under the Sarbanes-Oxley accounting reform act of 1992 is now investigating the firm, according to a report from FOX Business News' Charles Gasparino.

An inquiry into Ernst & Young has been launched by the Public Company Accounting Oversight Board, which is designed to investigate and discipline public accounting firms.

The inquiry will focus on the firm's "professional malpractice" in its approval of Lehman’s usage of the controversial accounting technique known as Repo 105 which was used to hide the erosion of the collapsed firm’s balance sheet.

Ernst & Young is currently also being investigated by the Securities and Exchange Commission and U.K. regulators in regards to past accounting practices.

Gasparino added that spokesman Charles Perkins for Ernst & Young has repeatedly denied that the accounting firm has had a hand in any wrongdoing.

The oversight board said that the investigations into the firm are confidential and are in the early stages, as they were launched after a report on the practices of Ernst & Young from Lehman bankruptcy examiner Anton Valukas was made last month.

The report claims that Ernst & Young did not disclose information about Lehman's use of Repo 105 and that the firm did not fully determine the legality in regards to U.S. accounting rules for the accounting practices.

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