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E&Y to face questioning from audit watchdog

Ernst and Young is to be questioned by the Financial Reporting Council over its role as Lehman Brothers’ auditor.

The audit watchdog says it is “ascertaining the facts” on E&Y’s Repo transactions following criticism of the accountancy firm in a report published by Anton Valukas for the US bankruptcy court.

The report said E&Y failed to act over accounting methods which allowed the bank to remove about £33bn of troubled assets from its balance sheets.

The FRC will look at how the transactions were accounted for and audited in the UK.

It says: “We have asked Ernst & Young to provide further information in relation to what happened in the UK.”

An E&Y spokeswoman says: “Ernst & Young will cooperate fully with all relevant parties on this matter.”

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