Tuesday, December 12, 2006

Fannie Mae Sues KPMG for $2 Billion! Alleges Abysmal Auditing

Fannie Mae (NYSE: FNM) is suing KMPG LLP for $2 billion today, indicating that it was negligent in playing its role as an independent “watchdog” and preventing billions of dollars of accounting errors. The firm is being sued for 17 counts of negligence and breach of contract in a suit filed in DC, Fannie apparently had $2 billion in damages and $1 billion in costs to restate earnings. Fannie had fired KPMG in December 2004.

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Zhenya said...

Not related to KPMG but also of note, PWC gets sued by the Russian tax authorities for alledgedelly assisting YUKOS in alledged tax evasions. Might be worth posting, for more info go to http://www.kommersant.com/p732996/r_529/

Anonymous said...

I would not want to be a partner at KPMG. They are already paying for the Tax Shelter settlement (although spread out over several years). Even if this settles for several hundred million, it's gonna hurt!

Anonymous said...

It's sad to think that other professional accountants can fall back on their external auditors with a suit like this that seems to indicate that KPMG established the non-GAAP processess when that is, of course, not the case.

It would be nice to see ANYONE take some accountability here.

Anonymous said...

i also agree with the above blog...everyone just wants to not take the blame...as a big4 auditor, it is amazing how much management lies to auditors. Many managers have a degree in accounting or started out in it, so it is not up to every CPA firm to analyze whether "professionals" in internal accounting are lying or not...auditing is merely statistical work, and it would take more than a fiscal year to completely trace every internal control and detailed transaction.