...Ernst & Young EXECUTIVE SUMMARY Ernst & Young commonly referred as EY, is one of the Big Four professional services firms along with Deloitte, PricewaterhouseCoopers and KPMG Ernst & Young is a multinational professional services firm headquartered in London, United Kingdom and was the third largest professional services firm in the world by aggregated revenue in 2012. The firm has employed 167,000 people and has more than 700 offices across more than 140 countries, providing assurance (including financial audit), tax, consulting and advisory services. In FY 2012, EY earned a record of $24.4 billion USD in revenue, ranking the third among the Big Four, after PricewaterhouseCoopers and Deloitte, ahead of KPMG. Ernst & Young offers its services to companies in a vast range of industries, including asset management, life sciences, mining, media and entertainment, retail, technology, and hotel and leisure. The company's financial reporting segment offers an IFRS/GAAP comparison so companies can compare and contrast the international and US accounting standards. The group's members firms are organized in four geographic areas: Europe, the Middle East, India, and Africa; the Americas (including Ernst & Young LLP); Japan; and the Asia/Pacific region. Ernst & Young is increasingly focused on the emerging markets, which have seen more rapid economic recovery than the developed nations. The company sees the trend of growth in the emerging markets as one that...
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...Profile of Lehman Brothers Lehman Brothers, which shook the US financial system with a statement declaring itself bankrupt Monday, is the fourth-biggest New York investment bank with roots going back to 1850. By AFP September 15, 2008 Be the first to post a comment NEW YORK - Lehman Brothers, which shook the US financial system with a statement declaring itself bankrupt Monday, is the fourth-biggest New York investment bank with roots going back to 1850. The bank, one of the most prestigious names in finance, employs about 27,000 people after staff cuts in response to asset writedowns totalling 13.8 billion dollars because of the subprime home-loan crisis. OPERATIONS: Lehman is one of the banks at the heart of the US, and global, financial system, being a primary dealer in US Treasury securities - US debt instruments. It has operations in investment banking and asset management, mainly through its Neuberger Berman unit. FINANCES: Lehman posted a loss of 3.9 billion dollars in its third fiscal quarter to the end of August, following a 2.8 billion-dollar loss in the second quarter. The firm has written off 13.8 billion dollars linked to the US subprime mortgage crisis, and has raised 10 billion dollars through share offerings this year. SHARE PRICES/VALUE: Lehman shares have slid from a high point of 66 dollars in February to less than 10 dollars. The 85-percent drop places its market capitalization at about 5.5 billion dollars, close to the level of...
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...Lehman Brothers & Repo 105 On September 15th 2008, the fourth largest U.S investment bank, Lehman Brothers, filed for chapter 11 bankruptcy. With revenues peaking at $19.2 billion in 2007 and over $600 billion in assets, the collapse of Lehman became the largest bankruptcy in history. Lehman’s demise was attributed to their aggressive investment strategy and significant exposure to the subprime mortgage market. As the housing bubble grew, Lehman Brothers acquired several mortgage lenders, some of the acquired firms frequently made loans to home buyers without full documentation (Jeffers 2011). When consumers began defaulting on mortgages and market conditions began to unravel, Lehman as well as many other banks faced huge losses. The write down of debt securities had significant adverse effects on Lehman’s balance sheet. Furthermore, credit rating agencies began focusing more on leverage ratios of investments banks. Lehman’s leverage ratios were already extremely high. A downgrade on Lehman’s credit rating would have sent Lehman’s share price on a downward spiral and hinder their ability to receive financing. In order to prevent these occurrences Lehman would have to sell some of its assets or raise capital. Lehman was unable to sell any of its assets or raise any capital because no one knew what the value of their complex mortgage securities were. In response to deteriorating economic conditions the investment bank used a very aggressive accounting maneuver...
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...but problem arise such as Lockheed Martin's role as the prime contractor being reduced, complaints from the Justice Department and IT related issues, the project got delayed by many months and is finally up and running. Some lessons learned from the article are that one should not deploy new software on old hardware. According to one of the articles, during a four hour test, 743 users suffered two outages. The mistake was that the agency ran the test on the legacy hardware which was then forced to upgrade to a rollout. This caused many delays. Another lesson learned was that a private sector expertise was valuable. This was a turnaround for them because they hired Chad Fulgham who was a former vice president of IT with brokerage firm Lehman Bros and his expertise would help the BFI tremendously. Finally, another lesson learned was that commercial software plays a very important role. Critics said Sentinel would have gone smoother if only it had been...
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...nonrecurring gains and a loss on own debt, Barclays reported a £4.4 billion pretax profit for the first nine months of 2009, which was a 116% increase on the same period in 2008. The performance of the retail and commercial banking activities was depressed by elevated impairment charges, but this decline was more than offset by increased earnings from Barclays Capital, which benefited from favorable market conditions and the September 2008 acquisition of Lehman’s North American businesses. Barclays Capital contributed 62% of the group’s underlying earnings in the first nine months of 2009, which is a materially higher proportion than Standard & Poor’s Ratings Services would expect in a normal environment. Nevertheless, we consider that the Lehman acquisition and additional hiring by Barclays Capital have raised the sensitivity of the group’s risk profile and earnings to conditions in securities markets. In our opinion, Barclays retains material credit market exposures, particularly in commercial real estate and leveraged finance. The aggregate disclosed exposure stood at £28.3 billion at Sept. 30, 2009, down from...
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...Introduction History of Lehman Brothers Subprime Crisis Explained Vicious circle & the fall of Lehman Brothers Organizational Culture at Lehman Brothers Future Conclusion Introduction Lehman Brothers Holdings Inc, aka the fourth-largest investment financial institution in the US (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch), was a 158 years old bank that had to declare its bankruptcy in September 2008. Led by its CEO, Richard Fuld, Lehman Brothers was a glorious and respected investment bank for which some of the most experienced and intelligent financial analysts/investors were working. How come then, than in a less than one week, the whole structure imploded and led to one historical bankruptcy and with the same occasion, became the trigger of the 2nd most dramatic worldwide financial crisis? This essay has been written, in what seemed to me, the most logical way to approach this very interesting and complex subject. A quick peak to Lehman Brothers’ history will help the reader to understand how, starting from very humble origins, Lehman Brothers became one of the top investment financial institutions in the US before its collapse. The financial crisis of 2008, also called the subprime crisis was the biggest reason of LB’s downfall. Having done some researches, the reader will be explained, in a very intuitive but complete manner, how this crisis began and how it evolved until it affected the whole world. One can already agree that LB’s got caught...
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...of America and Citibank, are in the United States. In Zombie Banks, the author has shown us the practice of zombie banking, explained why it does not work, and laid out the steps needed to rid the global financial community of these dangerous institutions. Zombie bank started to appear in 1990s with the huge declining of the price of real estate and stocks. It pulled every Japanese banks into huge bad debt situation. However, Japan refused to accept the suggestion from the US and took a way that government secretly support those bad debt banks instead of bankrupt. This solution do nothing good to the improvement for its financial situation and made Japan’s economy depressed for a decade. While covering the collapse of Lehman Brothers and Bear Stearns in 2008, Onaran discovered that no one within those organizations had the complete picture of how the companies functioned and, therefore, no one had any answers. Zombie Banks is Onaran’s attempt to connect the dots that make up the current global financial landscape. Zombies are most commonly known as undead, lifeless creatures that usually take hold of a living being through some type of supernatural force. However, as the author illustrates in his new book, zombies can also inhabit the inanimate objects—in this case, banks. “Zombie Banks” are described as “insolvent financial institutions whose equity capital has been wiped out so that the value of their obligations...
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...company’s financial statements. Some of the recent examples of corporate and accounting scandals were that of Enron, Adelphia, Tyco International, World Com, and Peregrine Systems, among others (Levine, 2013). The objective of this paper is to focus on and analyze one of such scandals. In this paper, the Lehman Brothers’ issue with the SEC regarding their malicious use of the Repo 105 maneuver will be studied, focusing on the audit report that the external CPA firm issued, speculations on the company’s statements, analysis of the management and auditor’s responsibility in the falsified financial reporting, the sanctions under the SOX and key actions that the concerned regulatory boards should make. Repo 105 Securities and Exchange Commission Accounting Scandal with Lehman Brothers and Ernst and Young Analysis of the Audit Report When the great financial crisis of 2008 erupted, it left a lot of United States corporations, mostly financial firms, under the water. Some of them were offered bail by the United States government but the damage was so severe plus the government could only do so much that only a handful of the bankrupted companies were saved by the bail offer. Lehman Brothers was one of the unfortunate companies...
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...Keith Parkinson 2/3/15 Auditing Case 1: Merry-Go-Round Merry-Go-Round (MGR) is a clothing retailer that was founded in 1968. The company’s locations were in malls that targeted the youth and teen market. In the late 1980s, the company was listed by Forbes magazine as one of the top 25 companies. By the early 1990s, sales fell due to stiff competition from other retailers. Facing bankruptcy, the company hired turnaround specialists from Ernst and Young (E&Y) to help overcome the financial crisis. However, the company filed for Chapter 11 reorganization and due to that a group of 9,000 creditors filed a lawsuit against E&Y saying they were the main reason for MGR’s decline. First of all, E&Y violated GAAS first standard that states, “The audit is to be performed by a person or persons having adequate technical training and proficiency as an auditor.” The turnaround team included inexperienced personnel that included a retired consultant, a partner with little experience in the U.S. and with retail firms, and two recent college graduates. I would say the first standard of Field Work was violated because the work wasn’t adequately planned and there was no supervision. The leader of the team took an eight-day vacation at critical point during the engagement. Also, while store closing were key to MGR’s survival, only 230 of 1,434 stores had been closed and MGR still operated two stores in some malls. Last, the cost-cutting strategy called for only $11 million in...
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...“Anything that is too big to fail is too big to exist”. Simon Johnson. Discuss. Simon Johnson is an American economist working as a professor in the MIT Sloan School of Management. He is known for his positions against the unregulated Wall Street and what he tries to tell here is that any system, the banking system in particular, that cannot survive without an element of the system is not viable. The term “too big to fail” refers to the big banks deep rooted in the banking system such as Goldman Sachs or Lehman Brothers. The size of these entities is so big that should one of them bankrupt it would soon drive the whole system into bankruptcy. Here Simon Johnson advise us to reduce the size of big banks in order to limit the risks of another collapse of the world’s finance. This statement is strongly related to the notion of Moral Hazard, as the banks are too big to fail, they know that public authorities will do anything to prevent there collapse in case of a problem. That is what happened in 2008 with the Emergency Economic Stabilization Act, which consisted in a bailout of the U.S. financial system representing more than $700 billions as an answer to the subprime crisis. With that in mind we can understand better the logic of Moral Hazard, the bailout of 2008 set a precedent for banks and they know they have a safety net so they can take more risks in their activities. This self-destructing logic is a manifestation of crony capitalism, it is like there is no regulation...
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...“Too Big To Fail” Movie Review Too Big To Fail The story took place when America faced financial meltdown in year 2008. This story focusing on the actions of U.S. Treasury Secretary, Henry Paulson to contained the problems during the period of August 2008 to October 13, 2008. Dick Fuld, CEO of Lehman Brothers, is seeking external investment, but investors are wary as Lehman is seriously exposed to toxic housing assets and the Treasury is ideologically opposed to offering any sort of bailout as they did for Bear Stearns. Paulson directs Fuld to declare bankruptcy before the market opens after both Bank of America and Barclays, whose express interest in Lehman's "good" assets fails the deal. The crisis then has spread to Main Street after GE is unable to finance its daily operations. Paulson decides that the only way to get credit flowing again is direct capital injections. The banks agree with the terms of that they will be receiving mandatory capital injection and they must use this money to get credit moving again, but Paulson balks at putting additional restrictions on how the funds are to be used. Paulson's Treasury deputy for public affairs laments that the parties who caused the crisis are being allowed to dictate the terms. At the end, although markets did stabilize and the banks repaid their Troubled Asset Relief Program funds, credit standards continued to tighten resulting in rising unemployment and foreclosures. As bank mergers continued, these banks became even...
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...Henry Lehman created a small general store selling groceries and dry goods to local farmers in 1844. Shortly after, Henry’s two brothers, Emmanuel and Mayer, joined the business. The three brothers established the business known as Lehman Brothers in 1850’s. The business transitioned from selling merchandise to commodities brokers, where they bought and sold cotton. Lehman Brothers grew rapidly due to the capitalization of high cotton prices. A partnership was formed with a cotton merchant that allowed Lehman Brothers to pursue other venues. Through strategic partnership the business survived the difficult times it experienced during the Civil War. Lehman Brothers opened a new office in New York which became the main campus for its operations. This office furthered their trading business and introduced them to the financial industry. In later years, Lehman became involved in the New York stock exchange where the underwriting business began. The firm grew rapidly and was very successful for years. After many years of hard work and success the company collapsed and filed for bankruptcy in 2008. Lehman had been unhealthy for a while and covered it up by secretly shuffling debt around to make its books look in order and deceive the real situation. Lehman used an aggressive accounting method to hide their losses and made it difficult for investors, executives and/or auditors to detect their actual financial status. This accounting method is known as REPO 105, which...
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...Lessons from Lehman Brothers: Will We Ever Learn Learning Team B MGT/521 July 27, 2015 Sandra Griffin Lessons from Lehman Brothers: Will We Ever Learn The culture at Lehman Brothers was one of greed, excess, and corruption. According to Lawrence Serewicz (2011-2013) “…profits before prudence means risk that can never be avoided” (para 19). Lehman Brothers culture was clearly that of “…go along to get along” (para 20). The culture at Lehman Brothers was a culture that encouraged risk taking. Robbins & Coulter (2010) reveal that culture and reward system supported and handsomely rewarded employees that made questionable and risky deals, while those that questioned poor decisions were overruled or completely disregarded. Top executives failed to recognize or ignored the magnitude of the problem and continued to hide behind falsified documents and loopholes like “Repo 105”. The culture at Lehman Brother was an environment of “don’t ask, don’t tell”. Executives shunned employees for asking questions about the risky actions and deal-making of top executives, or those in a position to make financial decisions regarding the company. A lot of incidents that were knowingly harmful to the company financially were swept under the rug. Many employees went along with the decisions for fear of losing their jobs. In return for their silence and willingness to go along with poor decision making, they were over compensated for their employment. The textbook notes that individuals...
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...Lynch (now as Subsidiary of Bank of America), Lehman Brothers and Bear Steams (sold to JPMorgan Chase) were the world top five investment banks in United States. They were the key players in the financial markets and make significant contribution to the economics. But when they failed, the consequences would also be extremely fatal. The 158 years old Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy on Sunday 1:45am, September 15, 2008 (“Wikipedia: Lehman Brothers”, July 15, 2013). With a total assets of $639 billion and $619 billion in debts, Lehman Brothers’ bankruptcy filing became the largest in history, It’s assets far surpassed those of previous bankrupt giants such as WorldCom and Enron (“IInvestopedia: Case Study", April 02, 2009). The collapse of the Lehman Brothers is contagious and even triggered the Global Financial Crisis. LEHMAN BROTHERS HISTORY Three brothers – Henry Lehman, Emanuel Lehman and Mayer Lehman in 1850, founded Lehman Brothers. Started as a normal dry-goods store, the brothers grew the business by buying and selling cotton to planters living in and around Montgomery, Alabama ("History of Lehman Brothers", n.d). Eventually the brothers built a cotton storage warehouse together with a cotton merchant John Wesley Durr in a brief partnership form. Thereafter in 1858, an office in New York was opened to fulfill the needs of the growing sales and trades. After Civic War, Lehman Brothers who already have a strong pressure in the cotton...
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...India Lehman Brothers is no more. Merrill Lynch has gone down the Bank of America maw. AIG too could go belly up. With a doubt, these developments in America are the most shocking events to have hit global financial markets. So where did it all begin? And what does it mean for the Indian stock markets? Find out. . . What is (or was) Lehman Brothers? America's fourth-largest investment bank Lehman Brothers Holdings Inc has filed the biggest bankruptcy petition known to mankind. The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. So what went wrong? Compiled by Rediff Business Desk Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1800s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s. Thus the collapse of the giant investment bank came as a major shock for the entire world markets that plunged after Lehman filed a Chapter 11 petition with US Bankruptcy Court in Manhattan. The $613 billion (some estimates put the size at $639 billion) bankruptcy thus throws up the question: why did the Wall Street giant go bust? Here's why. . . Why did Lehman Brothers go bankrupt...
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