In April 2009, New Century Financial sued KMPG, the auditing firm of the company, for recklessly and grossly negligent auditing.
New Century, America’s second-largest seller of sub-prime loans, went bankrupt in April 2007.
KPMG was sued for at least $ 1 billion.
KPMG was claimed two times, once in New York against KPMG’s American business, and once in Los Angeles against KPMG International. In New York, the court accuses that the operations of KPMG in the United States have led to “materially misstated” financial statements. In California, KPMG, also known as the international parent company, is blamed for “severely reckless and grossly negligent” activities of the US business.
The claims also charge that KPMG has flout the tougher laws on auditor independence. This laws were introduced in 2001, after Enron’s collapse.
New Century started his activities in 1996. Ten years later, the company was the second-biggest originator of sub-prime mortgages. They bundled the loans, sold them to investors, who gave them new capital to keep lending.
New Century would buy back the mortgage-backed securities if there were defaults within the first months. In 2006, the collapsing American housing market was the beginning of the problems at New Century. The investors stopped buying the securities because they knew about the problems. Barely a month later, New Century went bankrupt. They pointed out KPMG as the culprit. KPMG was sued for at least $ 1 billion.
New Century, America’s second-largest seller of sub-prime loans, went bankrupt in April 2007.
KPMG was sued for at least $ 1 billion.
KPMG was claimed two times, once in New York against KPMG’s American business, and once in Los Angeles against KPMG International. In New York, the court accuses that the operations of KPMG in the United States have led to “materially misstated” financial statements. In California, KPMG, also known as the international parent company, is blamed for “severely reckless and grossly negligent” activities of the US business.
The claims also charge that KPMG has flout the tougher laws on auditor independence. This laws were introduced in 2001, after Enron’s collapse.
New Century started his activities in 1996. Ten years later, the company was the second-biggest originator of sub-prime mortgages. They bundled the loans, sold them to investors, who gave them new capital to keep lending.
New Century would buy back the mortgage-backed securities if there were defaults within the first months. In 2006, the collapsing American housing market was the beginning of the problems at New Century. The investors stopped buying the securities because they knew about the problems. Barely a month later, New Century went bankrupt. They pointed out KPMG as the culprit. KPMG was sued for at least $ 1 billion.
It think that KPMG has made mistakes in the auditing, but it’s not the only reason for bankruptcy of New Century. The collapsing American housing market is also a cause, and KMPG has nothing to do with that. So New Century can’t blame KPMG for everything. It has to accept that they has made mistakes too.
Source: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6018408.ece
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