Bankrupt Lender's Audit Lapses 'Mind Boggling'

Bankrupt subprime lender, auditor ripped in report on business practices
By Jim O'Neill,  Newser User
Posted Mar 27, 2008 8:23 AM CDT
Headquarters for New Century Financial Corporation in Irvine, Calif. which filed for bankruptcy protection Monday April 2, 2007.   (AP Photo/Lenny Ignelzi)
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(Newser) – Auditors at now-bankrupt New Century Financial—once one of the nation’s largest subprime lenders and one of the earliest to fail—were accused of “mind boggling” lapses in a Justice Department report on the debacle released yesterday. Partners at accounting firm KPMG are said to have ignored “significant improper and imprudent practices” in order to keep the company’s business, the New York Times reports.

The report says that while New Century didn’t engage in earnings manipulation, irregularities overlooked by KPMG “almost always resulted in increased earning.” The charges echo those accounting firm Arthur Anderson faced after the 2001 Enron collapse. The report’s lead investigator says KPMG and New Century execs could be liable for the losses; creditors say they are owed $35 billion.