The Securities and Exchange Commission is looking into the relationship between the former First Union Corp. and KPMG, according to published reports.
First Union, now known as Wachovia Corp. after a 2001 merger, allegedly referred wealthy clients to KPMG for tax shelter advice from 1997 to 2002 -- while KPMG was already serving as auditor and client for the banking firm, according to the Charlotte Observer. KPMG served as First Union's outside auditor during the sale of the shelters, whose legality has been called into question by the federal government.
Since 2003, the SEC has been looking into whether the arrangement might have violated auditor independence rules.
In securities filings, Wachovia has said that KPMG assured the bank it was independent under both SEC and accounting rules. But the newspaper noted that a 2005 report by a Senate subcommittee found that the referral arrangement between KPMG and First Union constituted a "direct or material indirect business" relationship, which could violate SEC rules.
Previously on WebCPA:
KPMG Gets Okay for $153M Settlement (June 6, 2006)
SEC Approves PCAOB Auditor Rules (April 24, 2006)
More KPMG Execs Indicted over Shelters (Oct. 19, 2005)
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