More Totally Useless Auditors: New Century Financial

It's been a rough few days for the audit division of the beancounting profession. Days after the Sentinel bankruptcy trustee dumped a-hurtin’ on G. Victor Johnson and McGladrey & Pullen, Chicago, for alleged sins of omission and commission in the Sentinel Management Group Inc. debacle, a bankruptcy examiner did the same thing for the similarly competent KPMG for its contribution to the demise at the similarly dissolute New Century Financial Corp. [NEWCQ.PK].

The KPMG engagement team acquiesced in New Century’s departures from prescribed accounting methodologies and often resisted or ignored valid recommendations from specialists within KPMG. At times, the engagement team acted more as advocates for New Century, even when its practices were questioned by KPMG specialists who had greater knowledge...

And on and on for almost 600 pages. Compulsory reading for anybody thinking of ponying up that $200 million that Bruce Rose’s Carrington Capital Management, which bought New Century’s mortgage servicing business out of bankruptcy, is looking for. Worthwhile reading for anybody wondering about how the credit crisis started, or just how much things have changed since David Duncan was marching to Andy Fastow’s drum i.e. damn all.

In a related development, KPMG has applied to the Public Company Accounting Oversight Board to change its name to KRAP.

Inquiry assails accounting firm in lender’s fall
by Vikas Bajaj
The New York Times Mar. 27 2008

Final report of Bankruptcy Court Examiner (pdf file)
In re: New Century TRS Holdings Inc
(via The New York Times)

Carrington asks for $200m to replace bank loans [$$]
by James Mackintosh
The Financial Times Mar. 24 2008