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
: ‘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.

Further reading:

Editor’s blog on
KPMG International

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