Ernst & Young defended its work in a letter sent by several audit partners to the firm’s key clients and vowed to fight any follow-on legal action from regulators or creditors. “Ernst & Young is confident we will prevail should any of the potential claims identified against us be pursued,” the firm told clients.

“Lehman’s bankruptcy was the result of a series of unprecedented adverse events in the financial markets. [Its] bankruptcy was caused by a collapse in its liquidity, which was, in turn, caused by declining asset values and loss of market confidence in Lehman. It was not caused by accounting issues or disclosure issues.”

The letter was leaked to re:The Auditors, an American blog. In it, the firm described recent media coverage of Mr Valukas’s report as “at times . . . inaccurate, if not misleading”.

Several other media outlets also credited me as the first place this letter was published.

I have also posted a letter Ernst & Young sent to Audit Committee members defending themselves against the numerous allegations in the Lehman Examiner’s Report.

An Ernst & Young Response: Dear Audit Committee Member…

Update:

The Financial Times FTAlphaville blog links to the Audit Committee Letter this morning.

Reuters Emily Chasan picked up on this and linked to me today in her story on the Lehman whistleblower.

Blogger extraordinaire Zero Hedge follows up Emily Chasan’s story with his own including a shoutout to Emily and I.

Look for more from me, and Forbes, on these issues soon.

I was quoted twice.

Some proponents of stricter financial oversight see Kaufman, an obscure back-bencher, as an unlikely hero. “It’s so rare for an appointed senator to do so much, so loudly, so well, so quickly,” said Francine McKenna, a former managing director at BearingPoint, a global management-consulting firm. McKenna now has her own consulting firm and runs the investigative Web site, Re: The Auditors.

Read the rest, including my second quote, here.

“How can anyone — regulators, investors or anyone — understand what’s in these financial statements if they have to dig 15 layers deep to find these kinds of interlocking relationships and these kinds of transactions?” said Francine McKenna, an accounting consultant who has examined the financial crisis on her blog, re: The Auditors. “Everybody’s talking about preventing the next crisis, but they can’t prevent the next crisis if they don’t understand all these incestuous relationships.”

The rest of the story is here.

DUBIOUS BEHAVIOR

What Valukas brought to the endeavor was a no-nonsense lack of deference toward Wall Street game playing, says Francine McKenna, a former director at PricewaterhouseCoopers. “That’s a Chicago thing,” adds McKenna, herself a resident of the city. She now runs an investigative Web site called Re: The Auditors. “The mindset is: I’ve been around the block, I know how the game is played, and I’m not impressed by fancy names,” she says.

Barrett does a great job of putting the Lehman Report in the context of other bankruptcy examiner reports that have added significant actionable knowledge to high profile fraud cases such as Refco and New Century.

The piece also highlights the idea of a Foreign Service model—with its specialized training; attractive pension eligibility after as little as 20 years on the job; and long-term career tracks, allowing for variety and new challenges—for financial regulators.

That sounds something like my suggestion in January of 2009 for a National Service Corp for Accountability and Transparency – a way to put all of the currently in-transition accounting, audit and forensic specialists to work for the government. Maybe we can even move most of them out of conflicted audit firms and into public service to monitor taxpayer owned entities such as AIG, Fannie Mae and Freddie Mac.

Read the rest of the piece, Lessons from the Lehman Autopsy, here.

“The lawyers found a quirky way to threaten PCAOB and SOx itself,” said Francine McKenna, managing editor at re: The Auditors.com and a former director at PricewaterhouseCoopers. “Whatever the decision, I don’t think it should be construed as a referendum on either. The plaintiff found an obscure, high-impact issue to take to court that came out of the PCAOB stating the firm wasn’t up to doing the audits in question.” The small Nevada accounting firm in question, Beckstead and Watts LLP, filed suit after undergoing a costly inspection in 2006…”

Alex Howard’s story discusses the impact of the Supreme Court case re: the PCOAB on IT Compliance.  Article contains several quotes from me and the rest of the great story, including tons of resources to catch up on this issue .

Go here for this story in SearchCompliance.com.

See other recent stories discussing my position on Sarbanes-Oxley here, here, and here.

For the link to The Guardian story, go here.

For the link to my posts on PwC/Satyam, go here, here, here, here, here, here, here, here, here, and here.

For the link to Wall Street Journal story, go here.

For the link to my post on the lawsuits filed by the New Century bankruptcy trustee against KPMG LLP and KPMG International, go here.

Link to this story on Duration reporting in California’s IT strategic plan

More quotes in ZDNet here, here, and here.