Fannie sues KPMG for negligence

Fannie Mae has filed a massive lawsuit against its auditor, KPMG, for approving what turned out to be dubious financial reports from 2001 to 2003. The misreporting was perhaps the most massive ever, at about $6.3 billion. The cost to re-calculate the numbers was in the $1 billion range. Ouch! One could interpret this as a coda on the pre-Sarbox shenanigans that many assume occurred. But you have to wonder if the new rules will prevent this sort of debacle? The likelihood of some problems occurring has been reduced. The suit notes that KPMG played two conflicting roles: Advising Fannie on compliance with accounting rules and then auditing compliance. That would be seen as an obvious no-no now. But as we have often seen, if there are executives bent on crime, there is little Sarbox can do about it. Indeed, over the years, many have fingered the audit committee as the real culprit.

For more:
- here's a Washington Post article