The Unexpected Failure of Lehman Brothers. The failure of Lehman Brothers bank on September 15, 2008, created the largest bankruptcy in U.S. history and the global financial crisis that followed. There was no indication of going concern problems in Lehman’s financial reporting before it filed for bankruptcy. To say that the markets were surprised by its bankruptcy would be an understatement. The state of New York is pursuing a lawsuit against the audit firm seeking to recover $150 million dollars in fees earned. Many investors are also suing the audit firm. The audit firm publicly claimed that the financial statements of Lehman were “in accordance with GAAP.” The audit firm tried to get legal jurisdiction changed to U.S. federal court in hopes of a better outcome. On March 22, 2012, the case was moved from the federal court back to the New York state court because it was not within federal jurisdiction. This is not good news for the audit firm or the profession.
With some additional research, discuss the similarities of the Lehman Bros. case with that of Continental Vending, also discussed in this chapter.