The U.K.’s Financial Reporting Council recently decided against taking action against Ernst & Young over its auditing of Lehman Brothers shortly before the lender collapsed in 2008 and triggered a global economic crisis.
“Following the conclusion of the investigation, the FRC’s executive counsel, Gareth Rees, has decided that no action should be taken against Ernst & Young or any individuals in connection with their conduct in this matter,” the FRC said, Reuters reports.
The collapse of Lehman Brothers in September 2008 led regulators to question how the lender was deemed a healthy financial institution by auditors in the years leading up to the financial crisis. U.K. laws required banks to separate funds to be returned to customers in the event of the firm’s failure. The FRC said that Ernst & Young had essentially indicated that Lehman was in compliance with the rules.
E&Y said the decision “confirms our belief that the quality of our audit work met with the appropriate professional standards,” according to Reuters.
A key issue discussed in the case, however, was whether funds related to Lehman’s major clients required segregation. The FRC enlisted the help of experts to further investigate the issue.
“Following this, Executive Counsel has decided that there is no realistic prospect that a Tribunal would make an adverse finding against [Ernst & Young] in the U.K. or Members within that firm,” the FRC said. “The investigation will therefore be closed and no further action taken.”