The case, which was originally filed in 2010, centred on EY’s role as Lehman’s auditor in an alleged fraud involving Lehman’s use of ‘Repo 105’ transactions. 

These were transactions in which Lehman transferred to various overseas counterparties billions of dollars of investment grade securities in return for cash, with the binding understanding that Lehman would repurchase the same securities within a very short time, often just a few days.

The New York Attorney General’s office argued that this process, which it claimed had ‘EY’s approval and complicity’, ‘served no legitimate business purpose’.

The effect was to treat the Repo 105s as sales, enabling Lehman to artificially reduce its liabilities and manipulate its balance sheet to improve its leverage ratios.

As alleged by the attorney general, EY approved Lehman’s accounting for the Repo 105 transactions and issued unqualified opinions certifying Lehman’s financial statements, in spite of knowing that Lehman was not disclosing the existence or impact of the Repo 105s in its annual and quarterly consolidated financial statements, all of which the firm audited or reviewed.

There were also claims that EY failed to object when Lehman allegedly misled analysts on its quarterly earnings calls regarding its leverage ratios, and did not inform Lehman’s audit committee about a highly-placed whistle-blower’s concerns about Lehman’s use of Repo 105 transactions.

The original lawsuit sought $150m (£101m), the amount in fees that the firm earned from Lehman between 2001 and 2008, plus investor damages and equitable relief.

While the $10m (£6.7m) paid out is a smaller sum, EY has also agreed to pay $99m ($67m) in damages to investors in a class action settlement approved a year ago. Most of the money will go to investors, with the remaining settlement funds to be used to reimburse New York State for investigation and litigation costs.

New York attorney general Eric Schneiderman said: ‘The basic duty and legal obligation of auditors is to ensure that the public companies they audit provide reliable and unbiased information about their operations to the investing public.

‘If auditors issue opinions that are unreliable or provide cover for their clients by helping to hide material information, that harms the investing public, our economy, and our country.

‘Auditors will be held accountable when they violate the law, just as they are supposed to hold the companies they audit accountable.’

The case was the last significant lawsuit against EY over Lehman, according to a spokeswoman for the accounting firm in New York.

‘After many years of costly litigation, we are pleased to put this matter behind us, with no findings of wrongdoing by EY or any of its professionals,’ the firm said in a statement.