This is not the first time the fund industry has faced challenges with independent auditors.

In the summer of 1999, Fidelity Investments discovered that a manager within the consulting unit of PriceWaterhouseCoopers had owned shares of one of the Fidelity fund's that PriceWaterhouse's auditing division served as the independent auditor. Even though the manager had no direct ties to the actual auditors responsible for auditing the fund, SEC regulations as well as accounting standards prohibit partners, certain officers and managers of audit firms from owning shares in companies to which the firm provides independent auditing services.

Fidelity later learned that three other PriceWaterhouse employees had also held, but had sold, certain other Fidelity Funds' shares, also in violation of auditing standards.

A few months earlier, in March of 1999, Deloitte & Touche reached an agreement with the SEC under which certain key Deloitte personnel were required to sell their shares of certain Fidelity Funds, when Deloitte signed on to provide independent auditing services for almost one-quarter of Fidelity's then current mutual funds.

Then, two months ago, the SEC censured Big Five accountant KPMG of New York for engaging in improper conduct and for having lax practices related to its fund auditing services. The SEC found that from May through December of 2000, KPMG had held a substantial investment in a money fund managed by AIM Management, for whom KPMG provided auditing services. The SEC alleged that KPMG could not have acted as the money fund's "independent" auditor by virtue of its own large investment. The SEC also charged that KPMG had, on several occasions, falsely confirmed its independence.

According to AIM spokesman David Bachert, an AIM employee's routine check uncovered the conflict, and KPMG resigned as the auditor for 50 of AIM's funds in December of 2000. KPMG had acted as AIM's independent auditor since 1976.

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