An independent report ordered by the US Department of Justice points the finger at auditor KPMG for either initiating accounting fraud at New Century Financial Corp, one of USA’s biggest providers of home loans to people with poor credit, or ‘standing idly by’ as the failed sub-prime mortgage lender committed fraud in 2005 and 2006.

The 581-page report by court examiner Michael Missal concluded New Century, which filed for bankruptcy protection last April as one of the first major casualties of the sub-prime crisis, ‘engaged in a number of significant improper and imprudent practices related to its loan originations, operations, and financial reporting’, Reuters reports.

KPMG contributed to some of these accounting and financial errors ‘by enabling them to persist and, in some instances, precipitating the company's departures from applicable accounting standards,’ Missal said.

‘We strongly disagree with the report's allegations,’ Dan Ginsburg, KPMG spokesman, said. ‘We believe that an objective review of the facts and circumstances will affirm our position.’