@Going Concern “Let Me Tell You A Funny Story: Lehman’s Repo 105 Accounting”
By Francine • Mar 24th, 2010 • Category: Writing for OthersMy new column is up @Going Concern:
The formal definition of “professional skepticism” does not include the phrase, “pass the smell test.” Nor does it include the phrase, “If it walks like a duck, and quacks like a duck, it’s probably a duck.”
Like most AICPA prose it’s pretty vanilla.
“Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. The auditor should conduct the engagement with a mindset that recognizes the possibility that a material misstatement due to fraud could be present, regardless of any past experience with the entity and regardless of the auditor’s belief about management’s honesty and integrity.”
When a new batch of Ernst & Young auditors arrived at Lehman Brothers each year, Repo 105 transactions must have caused debate. After all, a transaction that’s called a “Repo,” short for “repurchase”, but that’s actually recorded on the books as a sale, is a little odd.
It may have even quacked.
Read the rest of the column here.
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Francine McKenna (@retheauditors) has more than twenty years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad. For more info, click the "About" page link at the bottom of this page.
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