By Vanessa Kortekaas From Financial Times

The UK accounting watchdog has launched two separate investigations into KPMG, only weeks after the firm was caught up in an insider-trading scandal involving its Los Angeles audit practice.

The Financial Reporting Council said on Thursday it was investigating whether KPMG was independent when it audited car dealer Pendragon’s financial statements for 2010 and 2011 as well as looking into a “non-timely disposal of a shareholding” in a client by a KPMG member.

KPMG is also facing a potential government inquiry into its audits of HBOS before the bank was rescued by Lloyds TSB.

The firm moved quickly to defend itself after the FRC’s announcement, saying: “We take our professional responsibilities very seriously, have stringent policies and procedures in place to ensure that our independence is not compromised and regularly review those procedures to ensure that they remain appropriate.”

The world’s fourth-biggest accountant said it maintained its independence while auditing Pendragon’s financial statements for the years ending in December 2010 and 2011. KPMG has been the car dealer’s auditor since 1997.

People with knowledge of the investigation said it related to a period when Mel Egglenton left his role as a senior partner of KPMG’s Birmingham practice to become a member of the audit committee for Pendragon.

Mr Egglenton joined Pendragon in December 2010, having left KPMG earlier in the year, and was recently appointed chairman-designate at Pendragon.

One person familiar with the investigation said: “This is not about Mel’s position, this is about KPMG.”

KPMG is understood to have conducted standard procedures that enabled Mr Egglenton to leave the firm to later work for one of its clients – in this case Pendragon.

Pendragon declined to comment on the investigation, but clarified that KPMG is still the company’s auditor.

In relation to the second investigation launched on Thursday, KPMG said it was “very disappointed” that one of its partners “mistakenly failed to dispose of the relevant shares on a timely basis and that our firm’s procedures, in this instance, did not deal appropriately with that failure”.

Neither the FRC nor KPMG named the client whose shares were held.

“We fully accept that the holding of shares in a client by a partner is in clear contravention of UK Ethical Standards. However, on becoming aware of the matter, we took action in relation to the partner concerned and initiated a review of procedures to ensure that lessons are learnt and applied,” KPMG added.

The firm recently resigned as auditor to both Los Angeles-based Herbalife, a nutritional supplement maker, and Skechers, the shoe maker, in the wake of accusations about its LA audit practice.

The FRC has yet to decide whether to investigate KPMG’s audits of HBOS.

For more on this story go to: http://www.ft.com/intl/cms/s/0/3e6973e4-b8bd-11e2-a6ae-00144feabdc0.html#axzz3caWSob9G

IMAGE: KPMG