Securities and Exchange Commission chief accountant Donald T. Nicolaisen has asked KPMG LLP to correct a statement that he says the firm attributed to him in a letter it sent to clients.
The flap stems from an SEC decision to ban auditors from charging contingent fees -- which are usually based on a percentage of savings that they produce for clients -- on tax work done for audit clients. The SEC, which banned such fees in 2000, recently clarified its opposition to the fees and rejected an American Institute of CPAs interpretation of the rules that was more expansive.
Nicolasien took issue with a statement about whether the SEC would challenge certain contingent fee arrangements with audit clients that he says was made in a letter KPMG LLP provided to clients last month. That letter included a summary of the nonpublic section of the Public Company Accounting Oversight Board's report on its 2003 limited inspection of the firm, according to Nicolaisen.
"I appreciate and commend KPMG's efforts to provide added transparency to the PCAOB inspection process. In that letter, however, the firm made a statement, which apparently is attributed to me, that is inaccurate," Nicolaisen wrote in a Sept. 15 letter to KPMG LLP chairman and chief executive Eugene O'Kelly.
"The letter states that 'assuming the AICPA rules for contingent fee arrangements had been complied with and the audit committee agreed that our independence had not been impaired, the SEC would not challenge our independence.' I made no such statement," Nicolaisen wrote.
"Furthermore, the commission has not made a decision regarding its position on these matters in respect of auditing firms. I expect that you will convey the substance of this letter to your clients and correct any misunderstanding or misperception resulting from your statement," the letter said.
KPMG did not respond to a request for comment by press time, but spokesman George Ledwith told The Wall Street Journal, "We made the statement referenced in the chief accountant's letter in good faith. It was never our intent to attribute the statement to the chief accountant. As a result, we have eliminated the passage in question and will be discussing that change with any clients who may be affected."
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