The Securities & Exchange Commission found the Big Five firm had been a substantial investor in a fund which it also audited, and has demanded reforms at the firm.

The SEC ruled the conflict of interest violated rules designed to maintain the integrity and independence of audits, and consequently the financial information upon which investors rely upon.

KPMG had invested heavily in Short-Term Investments Trust, an investment fund run by AIM Funds, one of the US's ten largest mutual fund groups.

But STIT was also audited by the firm.

KPMG said the $25m investment had been carried out by a third party and pulled out of the fund in December 2000 after AIM had told the firm of the investment.KPMG at the same time ended its relationship with AIM, which had been an audit client since 1976.