The U.K.’s Accountancy and Actuarial Discipline Board has begun an investigation into the conduct of Ernst & Young LLP as auditors to Lehman Brothers International Europe, including Lehman’s use of repurchase agreements.

The board said the scope of the investigation included the conduct of members and the member firm in relation to the preparation and audits of the financial statements of Lehman Brothers Holding Inc and U.K. operations, including Lehman Brothers International (Europe) for the year ended Nov. 20, 2007, and the use and accounting treatment of transactions known as “Repo 105” and “Repo 108” by Lehman Brothers Holdings Inc and U.K. operations including Lehman Brothers International (Europe).

A report by bankruptcy examiner Anton Valukas found that Lehman had used the repurchase agreements to temporarily shift up to $50 billion worth of assets off its balance sheet at the end of the first and second quarters of 2008 to make it seem to investors that it had less debt.

The decision by the board to investigate the auditing firm was taken following a consultation with the Institute of Chartered Accountants of England and Wales.

Ernst & Young said it would cooperate fully with the investigation. “Ernst & Young’s audit opinion stated that Lehman’s financial statements for that year were fairly presented in accordance with the relevant accounting standards, and we remain of that view,” said the firm, according to MarketWatch.

Earlier this week, Lehman’s European administrator, PricewaterhouseCoopers, proposed a plan to accelerate the return of up to $22 billion of assets to Lehman’s unsecured creditors, according to The Wall Street Journal. The plan could allow the majority of claims from the unsecured creditors to be agreed upon by the end of this year and the money distributed next year.

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