Fannie Mae has filed a lawsuit against former auditor KPMG, accusing the Big Four firm of 17 counts of negligence and breach of contract.

In the suit, the home mortgage giant alleges that KPMG applied more than 30 flawed accounting principles, costing its business more than $2 billion in damages -- including $1 billion in costs to restate earnings. Last week, Fannie Mae announced that it would reduce its earnings by $6.3 billion to correct accounting problems stretching back to 2001. The company’s financial statements are still not up to date.

Bloomberg News quoted a spokesman for KPMG as saying that the firm planned to pursue its own claims against Fannie Mae.

Fannie Mae fired the accounting firm in December 2004, just a week after the Securities and Exchange Commission ordered the company to restate more than two years of flawed earnings.

“[The lawsuit] is appropriate and consistent with the findings” of a federal examination into the bookkeeping mistakes, said the director of the Office of Federal Housing Enterprise Oversight James Lockhart, in a statement.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access