KPMG International faces $1bn lawsuit over New Century audit

KPMG International is facing a $1bn (£685m) law suit after the collapse of New Century, the sub-prime mortgage finance company whose collapse was thought to be the one of the triggers of the credit crunch.

The law suit filed last night in the Southern District of New York alleges that KPMG International had a 'right to control' the US arm of KPMG, which audited New Century before it folded on 2 April 2007.

Steven Thomas, trial lawyer for the plaintiffs The New Century Liquidating Trust And Reorganized New Century Warehouse Corporation, told Accountancy Age: 'This is the biggest case against an accountancy network in terms of amount and global impact.'

Thomas alleges KPMG LLP in the US 'had a complete lack of independence from KPMG International' .

A KPMG LLP US spokesman said KPMG's US arm would 'vigorously defend' its audit work.

'Any implication that the collapse of New Century was a result of accounting issues ignores the reality of the global credit crisis. This was a business failure not an accounting failure,' he added.

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