US debating indictment of KPMG

Accounting firm KPMG LLP has accepted full responsibility for the unlawful conduct of former firm partners involved with offering tax shelter services under criminal investigation by federal prosecutors.
KPMG, one of the world’s four biggest accounting firms, in a statement said it remained in talks with US prosecutors over the tax services it offered between 1996 and 2000 and was co-operating fully in probe began in February 2004, and it no longer offered the tax shelters under investigation.

Prosecutors had built a criminal case against KPMG for obstruction of justice and the sale of abusive tax shelters. Department of Justice was debating now whether to seek an indictment of KPMG.
KMPG said it had taken stringent measures to change its culture and structure and other steps to see that those responsible for wrongdoing had left the firm.

A criminal indictment against Andersen was the last time the US government brought a criminal indictment against a major accounting house, which was followed by Andersen’s obstruction-of-justice department lawyers consider in deciding whether to seek an indictment against KPMG. Justice department options include seeking some other resolution of the case.

Regulator fear about the likely consequences of prosecuting the firm. Companies can live with big four but three would offer little choice of auditors and make a mockery of the principle of rotation. Solutions being considered as breaking them into smaller units and further clamp down on non audit work.