The US Securities and Exchange Commission has condemned KPMG’s tax shelter
abuses as ‘unacceptable’ but has said that because the activities did not affect
the audit practice it would not be taking any action.
In a statement released yesterday, SEC chief accountant Donald Nicolaisen said:
‘Earlier today the U. S. Department of Justice announced that they have entered
into a deferred prosecution agreement with KPMG LLP that addresses issues
stemming from past services provided by KPMG’s tax practice.
‘KPMG has represented that it has stopped providing the types of tax services
addressed in this case and that it has made significant changes in the structure
and operation of the tax practice of the firm, and the supervision of that
practice, in order to avoid similar issues in the future.
‘The agreement by KPMG provides a comprehensive and forward-looking framework
for addressing the violations identified by DOJ, which do not arise under the
federal securities laws. In addition, pursuant to the agreement, the United
States Attorney for the Southern District of New York, David Kelley, appointed
former SEC Chairman Richard Breeden to monitor the firm’s compliance with the
terms of the agreement. The PCAOB has advised me that it is issuing a statement
on KPMG’s ongoing ability to perform audits of public companies based on its
annual inspections of KPMG’s auditing work.
‘I am pleased that DOJ and KPMG have reached an agreement to resolve the issues
under investigation by DOJ. I believe that the past conduct described in the
agreement was unacceptable and the resulting penalties are appropriately
significant. The agreement addresses tax shelter activities outside KPMG’s audit
practice and does not require or call for Commission action. Commission staff
will of course monitor the situation in view of the Commission’s
responsibilities to investors and markets.’
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