Big Five Firm Cited for Independence Violations

January 14, 2002, 1:00 a.m. EST 1 Min Read

The Securities and Exchange Commission today announced that it has censured a big five accounting firm for auditor independence violations.

The SEC censured KPMG LLP for falsely claiming it was an independent auditor when, in fact, it held a significant investment in one of AIMs money market funds. The SEC found that from May through December of last year, KPMG held at least $25 million in the AIM Short-Term Investments Trust and at one point accounted for at least 15% of its net assets, according to the SEC.

The SEC also found that KPMG repeatedly maintained its independence from the AIM Funds while it was conducting audits of the fund and also invested in it, it said.

For its part, AIM had no way of knowing whether KPMG was invested in the fund because the investment was made through an third party intermediary, said a source close to the situation.

The SEC also found that KPMG:

Had no procedures in place requiring the participation of a KPMG partner in the selection and research of money market investments.

Had no policies or procedures designed to indicate to auditors where the firms cash was invested or requiring them to check a listing of the firms investments prior to accepting new audit clients.

Had no procedures allowing treasury department officials to check the firms "restricted entity list."

The SEC has concluded as a result of its investigation that KPMG had no system in place to insure that it was independent from its audit clients.