Controversy continued to rage yesterday as KPMG was left reeling from a US legal settlement which stopped just short of threatening its very future.
The accountancy firm has agreed to pay $456 million (£253 million) to settle a federal government probe of its sales of fraudulent tax shelters, avoiding a criminal indictment that might have crippled it.
It has apologised, but critics have accused the government of mis-use of power.
While KPMG, the smallest of the major US accounting houses, escaped an indictment of the kind that destroyed Arthur Andersen when it was convicted of destroying documents, eight former partners - including its former deputy chairman Jeffrey Stein - and a KPMG lawyer were hit for selling the tax shelters to wealthy clients.
It means KPMG, which has a major Birmingham office, avoids the threat of a worldwide meltdown which could have reduced the accountancy world to just three global players - Pricewaterhouse-Coopers, Ernst & Young and Deloitte.
An outside monitor, Richard Breeden, a former Securities and Exchange Commission chairman, was appointed to oversee the firm's compliance with the settlement, which includes an agreement to shut down, within six months, its tax practice for high net worth individuals.
"That is a big blow, it was one of their flagship businesses that was quite profitable," said Robert Willens, accounting and taxation analyst with Lehman Brothers.
Auditor watchdog the Public Company Accounting Oversight Board said it remained confident in KPMG's ability to perform "high quality" audits. But legal experts said the firm's problems are not yet over, since it still has to deal with civil lawsuits from tax shelter clients.
Jonathan Feld, attorney with the Chicago-based firm Katten Muchin Rosenman, said: "It's a big victory for KPMG, but they have only resolved the criminal matters."
The government said KPMG made $115 million (£63.8 million) in fees in a fraudulent conspiracy that stretched from 1996 to 2003.
The accounting firm generated at least $11 billion (£6.1 billion) in phoney tax losses for wealthy individuals.
"KPMG is pleased to have reached a resolution with the Department of Justice. We regret the past tax practices that were the subject of the investigation. KPMG is a better and stronger firm today, having learned much from this experience," said its chairman and chief executive, Timothy Flynn.
The shelters at issue are no longer sold by KPMG. The accounting industry generally has scaled back its shelter business amid a surge of official probes and bad publicity.
According to federal government documents, KPMG sold three "abusive" tax products: Bond-Linked Issue Premium Structure, or BLIPS, Foreign Leveraged Investment Program (FLIP) and Offshore Portfolio Investment Strategy (OPIS).
A lawyer for Richard Smith, one of the indicted former partners, criticised the settlement as an attempt to " criminalise" the type of tax planning that tax professionals engage in on a daily basis.
"There is nothing hidden, fraudulent or criminal about the BLIPS transaction.
"It was fully and openly reviewed and approved by many KPMG professionals and independent law firms who believed that BLIPS complied with the tax law," said Robert Fink, of law firm Kostelantez & Fink.
"If the government wants to put an end to these types of transactions, the proper response is for Congress to change the law, not scare professionals away with indictments.
"It is a misuse of prosecutorial discretion to use criminal prosecutions to change accepted and legitimate standards of conduct."