NY suit against Ernst over Lehman takes detour

Found this article buried deep within Reuter's website.  It outlines the lawsuite against Ernst and Young led by several pension funds over audits performed by Ernst and Young of Lehman Brothers.  The article goes on to explain how Ernst contends throughout the lawsuit that the firm acted properly and that Lehman's accounting complied with national standards.  The lawsuit claims that Lehman used "Repo 105" to appear less risky.  A "Repo 105" is a short-term loan classified as a sale.  The cash is used to pay down debt which lowered the leverage of the firm.  Later, the firm would repay the loan or give equivalent securities assets.  The firm believed this to be legal since the firm would hand over equivalent securities and not the original ones.  The results of this maneuver is that Lehman was able "window dress" to the tune of over $28B in 2008 just before the firm folded.The legal firm who handled these transactions contends that they are indeed legal.  But how ethical is it?  How is it that Ernst and Young tested these transactions and still gave an unqualified opinion? 
http://www.reuters.com/article/2011/02/23/ernstyoung-lawsuit-idUSN226767820110223?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43
http://dealbook.nytimes.com/2010/03/12/the-british-origins-of-lehmans-accounting-gimmick/

Nasdaq is up again...more fraud to be uncovered?

The stock market is up; my own company stock is up over 100% from when I first started working there almost 3 years ago. 
So, does this mean that there is more fraud to be uncovered?  In good times, ethics are often ignored.  It's in bad times that we play Monday morning quarterback.  In a recent article in Yahoo! Finance, the writer, cites Wall Street investments analyst's opinions that this is totally different from 10 years ago.  The analyst uses price/earnings ratio from then and now as an indicator that valuations are indeed legitimate this time.
I'm more inclined to believe other stats like the Bureau of Labor Statistics jobs report.  I know that if more Americans are working, the economy is truly back on good economic footing.

Savings and Loan Industry Failures

Chapter 4 describes the effect that the Savings and Loans industry failures had on the accounting profession.  The failures centered on inadequate allowances for doubtful accounts, disclosure failures, and internal control failures. 
I was once a RTC/FDIC contractor and was responsible for booking many journal entries and case write-ups for several of these institutions.   The failed institutions were deemed so by examiners who would go into the banks, go over the records and deem them solvent or insolvent.  Those that were insolvent would go into what was called receivership. 
Without going into specifics, I was able to see close up how the accounting failures effected, not only the accounting industry, but the public trust at large. 

Corporate Governance - External and Internal Pressures

Chapter Three talks about Corporate Governance which is shaped by external and internal mechanisms.
I would re-term it as pressures. 
The Board of Directions is usually aligned with management since, more than likely, there is a personal relationship between management and Board members.  This can lead to impairment of judgement by board members who may look the other way as long as the financials look good.  The audit committee should be accessible to the internal auditors so that any fraud concerns can be dealt with before they become a matte of public concern.
Problems come into play when management changes the tone from the top.  Once the CEO adopts a certain ethical stance, then it permeates or contaminates every aspect of the financial process.  So, it turns into a career limiting move to report anything but good financial news.
The best organization will have the internal auditors completely independent from management.  Don't know how you do that since the internal auditor is hired, usually by managment.  So is it realistic to expect total independence?  In the Enron case, Cooper did report to the audit committee, but it seemed that her reason was because she saw the storm coming and wanted to distance herself from the fallout.  I think she weighed the consequences of reporting versus her larger financial career.

There's No Such Thing as Business Ethics?

John Maxwell contends that there is no such thing as "business ethics".  He believes that there is one single standard of ethics that governs our lives, be it personal or professional. 

I believe that there are "business ethics".  I think that there are things that we would do in business situations that we would not be willing to do because there are business pressures that we do not face in our personal lives due to decisions made in business that are beyond our control.  Also in business you have so many other stakeholders which make decisions a bit more complicated than in your personal life.