KPMG Cited Problems With Fannie's Reporting

Fannie Mae's auditor, KPMG LLP, warned the company as recently as this fall that the GSE still had "material weaknesses" in its financial reporting, according to documents filed by Fannie with the Securities and Exchange Commission.In the filing, Fannie Mae says KPMG told it that the auditor "observed deficiencies" in the government-sponsored enterprise's "process of closing its accounting records" for the quarter ended Sept. 30 "that resulted in post closing entries to the interim financial information." Fannie fired KPMG -- its auditor since it went public in 1970 -- on Dec. 21. Even though Fannie reported earnings for the third quarter, it has yet to file a standard 10-Q with the SEC pending several investigations of its accounting practices. The mortgage giant is expected to restate earnings by $9 billion, dating back to 2001. Both Fannie and KPMG declined to comment on the SEC filing, which came late Dec. 28.