ASIC to sue KPMG for $200 million over Westpoint audits

Australia’s corporate regulator, the Australian Securities and Investments Commission, is suing accounting firm KPMG for $200 million over the collapse of financial services company Westpoint.

Australia’s corporate regulator, the Australian Securities and Investments Commission, is suing accounting firm KPMG for $200 million over the collapse of financial services company Westpoint.

ASIC hopes the case – believed to be the first time the watchdog has sued – will result in Westpoint investors receiving compensation for losses sustained when Westpoint collapsed.

ASIC chairman Tony D’Aloisio says up to 80% of investors could benefit from the action, if it is successful.

ASIC has accused KPMG of negligent conduct in its auditing of the financial accounts of various Westpoint companies for the 2002, 2003 and 2004 financial years, and has launched claims “in the order of $200 million”.

“The proceedings brought by ASIC allege that KPMG negligently carried out audits of the plaintiff companies by failing to identify issues related to the continuing solvency of the companies and failing to qualify audits of the companies,” D’Aloisio said in a statement.

“The claim also alleges that KPMG should have notified ASIC that it had grounds to suspect that breaches of the Corporations Act were taking place within the plaintiff companies, including breaches of directors’ duties and rules against insolvent trading.”

KPMG said in a statement that it has co-operated fully with ASIC during its investigation into the Westpoint collapse since December 2005.

“While we understand that substantial monies have been lost by investors in Westpoint companies, and that various groups and individuals are naturally keen to recoup their losses, KPMG does not believe that the conduct of its audits of Westpoint entities caused or contributed to the collapse of the Westpoint group or to losses suffered by investors.”