The fallout from Anton Valukas's post-mortem on Lehman Brothers continues (Lehman Brothers news). Bloomberg weighs in with an article that suggests audit firms, despite the landmark Sarbanes-Oxley legislation (Sarbanes-Oxley news), may "still put client interests ahead of investors."

We've noted previously that the report took a dim view of Ernst & Young's audit of Lehman Brothers, the only Wall Street client of the audit firm. At issue of course are the Repo 15 transactions that were used to dress up the finances. Both CEO Richard Fuld (Richard Fuld news) and CFO Christopher O'Meara, who worked at Ernst & Young before moving to Lehman Brothers, say they never knew about the transactions. Both of them had to attest to earnings as required by Sarbanes-Oxley.

For now, the audit firm is defending its actions. Reuters notes that partners at the audit firm sent letters to audit committee members and clients, defending their audit of Lehman and how it dealt with a whistleblower's letter. The firm believes that it would be able to defend itself in court, and that a lot of the media coverage has been wrong. As for the whistleblower letter, it did not mention Repo 15 transactions, they were brought up later.

In addition, "when we learned of the letter, our lead partner promptly called the Audit Committee Chair; we also insisted that Lehman's management inform the Securities and Exchange Commission and the Federal Reserve Bank of the letter. EY's lead partner discussed the whistleblower letter with the Lehman Audit Committee on at least three occasions during June and July 2008," Ernst & Young said in the letter, as reported by Reuters. Nevertheless, the SEC's Mary Shapiro has said the report raises serious questions about Sarbanes-Oxley.

For more:
- here's the Bloomberg article
- here's the Reuters article

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