KPMG settles with SEC on Xerox audits

KPMG, the accounting firm, was censured on Tuesday by the Securities and Exchange Commission, which said the firm helped executives at the Xerox Corporation manipulate and distort financial statements from 1997 through 2000 by issuing audits stating that Xerox’s reports were consistent with accounting rules when they were not.

KPMG, which settled the case with regulators, also agreed to make extensive changes to its business practices to prevent future securities law violations. One measure requires the chairman of KPMG to certify to the SEC that the mandated overhaul has been put in place and to provide the commission with evidence that the firm is conforming to the changes.

KPMG also said it would pay almost $22.5 million in the settlement, including a $10 million civil penalty, repayment of the $9.8 million it earned by auditing Xerox’s books during the period, and $2.7 million in interest.

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KPMG neither admitted nor denied wrongdoing in settling the case.

Regulators said accounting fraud began at Xerox in 1997, and allowed the company to overstate its financial results by $1.5 billion over four years. Xerox shares lost 80 per cent of their value after the fraud was disclosed in 2000. — NYT