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The auditing lesson from Lehman Bro
Lehman’s case indicates that low accounting quality may have undesirable impacts on audit quality. To overcome this, auditors should exercise professional judgement and scepticism to inspect accounts “not just in form, but in substance” (Evanson 2010), and adopt effective audit process to ensure audit quality. Besides, audit quality may also be threatened by “the fragmentation of accounting standards and national regulation of audits” (Sanderson 2010a) due to the ever increasing complexity of global business. To quote Sanderson (2010a), it is true that “Repo105 would have come out on the balance sheet” under IFRS. Perhaps “a quicker and more uniform adoption of IFRS” (Evanson 2010) and “global audit regulation” (Sanderson 2010a) could be a better option.
Details
| language |  | english |
| wordcount |  | 1290 (cca 3.5 pages) |
| contextual quality |  | N/A |
| language level |  | N/A |
| price |  | free |
| sources |  | 12 |
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Preview of the essay: The auditing lesson from Lehman Bro
The collapse of Lehman Bros in 2008 was not only the world’s largest bankruptcy, but also set off a destructive domino effect evolving into a GFC (Evanson 2010). Valukas’s examiner report highlighted Lehman’s use of Repo105 to artificially improve its balance book’s health. Typically, repurchase transactions are recorded as loans under U.S. GAAP. Yet SFAS140 permits them to be recorded as sales if ...
... regulation of audits” (Sanderson 2010a) due to the ever increasing complexity of global business. To quote Sanderson (2010a), it is true that “Repo105 would have come out on the balance sheet” under IFRS. Perhaps “a quicker and more uniform adoption of IFRS” (Evanson 2010) and “global audit regulation” (Sanderson 2010a) could be a better option.
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