The Australian corporate regulator, The Australian Securities and Investment Commission, has taken legal action against KPMG over its auditing of companies in Westpoint, a property group which collapsed in early 2006 with losses of more than AUS$300m (£115m).

ASIC claims the firm was negligent when auditing the accounts of various Westpoint companies for the years ended 30 June 2002, 2003 and 2004 and is seeking AUS$200m in compensation for investors.

'The proceedings brought by ASIC allege that KPMG negligently carried out audits of the plaintiff companies by failing to identify issues related to the continuing solvency of the companies and failing to qualify audits of the companies,' Tony D'Aloisio, ASIC chairman, said in a statement.

'The claim also alleges that KPMG should have notified ASIC that it had grounds to suspect that breaches of the Corporations Act were taking place within the plaintiff companies, including breaches of directors duties and rules against insolvent trading.'