Less than two months after hiring KPMG LLP to replace Arthur Andersen LLP, software vendor Peregrine Systems is firing its new auditor, citing past dealings with KPMG that may violate U.S. Securities and Exchange Commission requirements for auditor independence.
Peregrine dropped Andersen in early April, attributing the change to "current uncertainties" about Andersen in the wake of the Enron debacle. Peregrine was soon after enmeshed in an accounting tangle of its own: Revenue of up to $100 million may have been improperly booked during the 2001 and 2002 fiscal years, the company said in May. The announcement prompted the resignations of Peregrine's CEO and chief financial officer, and spurred investigations by both the SEC and Peregrine's audit committee.
KMPG had begun that internal investigation, which will now be conducted by PricewaterhouseCoopers LLP, Peregrine said late Tuesday. Last week, the company extended the time frame during which it says accounting improprieties occurred, announcing plans to restate its financial results for 2000, 2001 and the first three quarters of its 2002 fiscal year.
The contested revenue relates to transactions recorded as revenue from Peregrine's indirect channels that may have been written off in later quarters, according to the company.
The conflict with KPMG stems from past business dealings between Peregrine, KPMG and KPMG Consulting, a now-independent spinoff from KPMG that went public in 2001.
"KPMG informed Peregrine that approximately $35 million of the questionable ($100 million) transactions were with KPMG and KPMG Consulting," Peregrine said in a statement. Peregrine officials decline to elaborate on how the $35 million was generated. The company is offering no comment beyond its press release.
Peregrine believes its dealings with KPMG and KPMG Consulting compromise SEC rules regarding auditor independence, it said.
Last week, the SEC accused Ernst & Young LLP of violating independence rules by auditing the books of PeopleSoft Inc. while also developing and marketing a software product with the company. Such a breach would constitute a "very significant violation of federal security laws," an SEC official said at the time.
A search for new independent auditors is under way, and Peregrine has entered into discussions with candidate firms, the company said Tuesday.
The IDG News Service is a Network World affiliate.
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