LONDON Aug 1 Britain's accounting watchdog has dropped its probe into KPMG over its audits of BAE Systems in connection with past corruption allegations at the UK defence contractor.
The Financial Reporting Council (FRC) said in a statement it has closed the inquiry it began in 2010 because it would have to include audits done before the 1997 to 2007 period it originally targeted.
These years cover commissions paid by BAE to third parties in arms deals and BAE paid nearly $450 million in 2010 to settle a transatlantic bribery investigation by U.S. and UK prosecutors.
The FRC said any sanction against KPMG would have to be approved by an independent tribunal and there was no realistic prospect it would make an adverse finding on work done so long ago if earlier years were also included.
It was therefore not in the public interest to extend the probe to before 1997, the FRC said in a statement.
KPMG said on Thursday it had said in 2010 it did not believe there had been any act of misconduct at the auditor and that it would cooperate fully.
"We have done so and we welcome the announcement by the Financial Reporting Council that the case has been closed and that no further action is proposed," a KPMG spokesman said.