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Friday, September 30, 2005

Accounting firm criticized over audits

WASHINGTON - Accounting regulators criticized KPMG LLP on Thursday for failing to identify significant errors uncovered in an intense, months-long inspection of the accounting firm's work.

A report by the Public Company Accounting Oversight Board, created by Congress to provide independent oversight of the accounting industry, cited numerous faults in 18 audits performed by KPMG for publicly held companies. In one case, mistakes exposed by the board led an unnamed client company to restate previously reported earnings. Board inspectors selected for review a small slice -- 76 audits -- of KPMG's nearly 1,900 publicly traded clients between June and October 2004.

The report comes a month after KPMG, the nation's fourth-largest accounting firm, agreed to pay $456 million and overhaul its business practices to settle Justice Department charges that it engaged in a conspiracy to help wealthy clients evade taxes. The firm has opened its operations to monitoring by former Securities and Exchange Commission Chairman Richard Breeden and fired or pressured to retire nearly three dozen partners. If KPMG stays out of trouble until Dec. 31, 2006, the U.S. attorney in the Southern District of New York will dismiss the conspiracy charge.

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