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Scott Jagow: New Century Financial is one of those subprime mortgage lenders that went bankrupt. But apparently, making bad loans wasn’t the whole story. It’s now come out that New Century was also cooking the books. Amy Scott has more.

Amy Scott: In the third quarter of 2006, New Century said it made more than $63 million profit. But a court examiner’s report made public yesterday says the company should have reported a loss, and auditor KPMG shares the blame. The report says auditors went along with New Century’s questionable accounting practices, and in some cases even instigated rule-bending.

KPMG says it strongly disagrees with the report’s findings. But its recent past raises eyebrows. A few years ago, the company paid millions of dollars to avoid prosecution in a tax shelter case.

The report says more than 450 companies and individuals may be able to sue the firm for professional negligence.

In New York, I’m Amy Scott for Marketplace.