Lehman Brothers
Detection:
The use of aggressive accounting methods to hide losses made it hard to detect what the Lehman Brothers’ were doing wrong. In using the infamous Repo 105 trick it made covering up all the Lehman Brothers’ losses easy. Some say that the transactions were deceitful, but not unlawful. According to the grand jury report there is evidence that exists on violations of the Sarbanes-Oxley Act and other laws. The first problem with this scandal that made it so hard to detect was the CEO, other executives, and the auditing group (Ernst & Young) al knew about the Repo 105’s that were going on. The auditing group did not take and measures to question this accounting tactic that was going on. What led up to the detection of the scandal is when JPMorgan Chase called on for the Lehman Brothers’ to pay back a loan that they had lent in the past. The Lehman Brothers’ did not have the sufficient funds to pay back this loan. Once the Lehman Brothers’ could not pay back this loan the public began to question if investing money with them was safe. Other investors began to try to get their money back after seeing this and the Lehman Brothers’ could not pay it. An investigator was then hired to look into the financial records of the Lehman Brothers’ and developed a 2200 page report about what the firm had been doing.
Prevention:
The Lehman Brothers’ bankruptcy was an event that rocked, and almost crippled, the financial world in 2008. It was a key event in the economic crisis that the United States, along with the rest of the world, is still feeling today. Although it seems as though Lehman Brothers’ top management knew about and intentionally encouraged the events that led up to their bankruptcy, there could have been several different ways to monitor and prevent this huge accounting fraud. First and most importantly, there should have been closer monitoring in the way the Repo 105s that were used to inflate Lehman Brothers’ financial standing were used
The use of aggressive accounting methods to hide losses made it hard to detect what the Lehman Brothers’ were doing wrong. In using the infamous Repo 105 trick it made covering up all the Lehman Brothers’ losses easy. Some say that the transactions were deceitful, but not unlawful. According to the grand jury report there is evidence that exists on violations of the Sarbanes-Oxley Act and other laws. The first problem with this scandal that made it so hard to detect was the CEO, other executives, and the auditing group (Ernst & Young) al knew about the Repo 105’s that were going on. The auditing group did not take and measures to question this accounting tactic that was going on. What led up to the detection of the scandal is when JPMorgan Chase called on for the Lehman Brothers’ to pay back a loan that they had lent in the past. The Lehman Brothers’ did not have the sufficient funds to pay back this loan. Once the Lehman Brothers’ could not pay back this loan the public began to question if investing money with them was safe. Other investors began to try to get their money back after seeing this and the Lehman Brothers’ could not pay it. An investigator was then hired to look into the financial records of the Lehman Brothers’ and developed a 2200 page report about what the firm had been doing.
Prevention:
The Lehman Brothers’ bankruptcy was an event that rocked, and almost crippled, the financial world in 2008. It was a key event in the economic crisis that the United States, along with the rest of the world, is still feeling today. Although it seems as though Lehman Brothers’ top management knew about and intentionally encouraged the events that led up to their bankruptcy, there could have been several different ways to monitor and prevent this huge accounting fraud. First and most importantly, there should have been closer monitoring in the way the Repo 105s that were used to inflate Lehman Brothers’ financial standing were used