Once again, we can ask: Wasn't Sarbanes-Oxley supposed to prevent this? Mortgage fraud has been front-page news. A 581-page report by a bankruptcy court examiner has found that New Century--a subprime leader--did a lot of shady stuff. The bombshell is that the report found that auditor KPMG [0] enabled these practices, and thus should be held accountable. The New York Times raises the spectre of Enron and Arthur Andersen. KPMG denies the allegations. There is a big inside story here. Apparently, there were some emails from the KPMG partner suggesting the client was really playing hardball. But at some point, the auditor has to stand up. We'll likely hear more soon.  

For more:
- here's the New York Times article [1]
- more [2] on auditors caving in

Related Articles:
Analysis slams Bear Stearns' subprime activity. Article [3]
Some hedge funds hit by subprime meltdown. Article [4]