Final answer:
KPMG faced criminal charges for creating fraudulent tax shelters to help clients evade taxes from 1996 to 2002, resulting in a $456 million penalty to avoid indictment.
Step-by-step explanation:
KPMG, which is one of the largest professional services companies and one of the Big Four auditors, was criminally prosecuted for its role in a tax shelter scandal during 1996 to 2002. The scandal involved the creation of fraudulent tax shelters designed to help wealthy clients avoid paying taxes.
After a long investigation, KPMG admitted to criminal wrongdoing in creating and selling these illegal tax shelters to clients, which constituted fraud and conspiracy. The firm agreed to pay $456 million in penalties to avoid an indictment which could have potentially put them out of business.
The prosecution highlighted the lengths to which some firms would go to facilitate tax evasion and the ensuing responsibilities within corporate governance to prevent such schemes. The scandal not only damaged the reputation of KPMG but reinforced the need for tighter regulation and oversight within the accounting and finance industries.