According to the firm's filing with the Securities and Exchange Commission, KPMG will sell some 324 million shares of common stock with a project price range of $6.75 to $8.75 per share.

While KPMG first announced its intention to spin off the consulting arm more than a year ago, the timing of the move is critical. The Big Five firms have been under pressure by the SEC to separate their burgeoning consulting practices from their accounting businesses in the interest of auditor independence.

At issue is whether a firm that gets paid to provide non-audit services, such as consulting services, can perform an objective, independent audit of that company. The SEC doesn't seem to think so, and has proposed tightening the rules, further limiting an audit firm's ability to provide management information services to its audit clients and performing internal audits.

The proposal has drawn the ire of several large firms, which stand to lose some hefty consulting fees if the SEC has its way. KPMG, Arthur Andersen, and Deloitte Touche in June testified at a SEC hearing against restricting the consulting services, contending that there are no proven cases in which an audit had been compromised because of the auditing firm's other relationships with the client.

Other major accounting firms have or will likely follow the trend toward separating their consulting units. Ernst & Young sold its consulting practice to professional services firm Cap Gemini. Andersen Consulting will separate from parent firm Arthur Andersen as a result of a divorce ruling announced Monday. PricewaterhouseCoopers, which was found in an independent investigation to have widespread auditor independence violations, is in the process of a major reorganization that will separate its management consulting, business process outsourcing, and human resource consulting practices from its business advisory and tax businesses.

KPMG consulting plans to use part of the net proceeds to provide more funds for working capital; to buy back Series A preferred stock from Cisco, to repay outstanding debt; to fund the cash component of possible acquisitions of consulting practices outside the U.S.; and for other general purposes, Dow Jones reported.

KPMG and its partners and principals, which include Cisco Systems, will reportedly own no more than 19.9 percent of the public company's common stock following the IPO, the reports said. Morgan Stanley Dean Witter is managing the offering. KPMG Consulting has applied to list its stock on the Nasdaq Stock Market under the symbol KCIN.

According to the SEC filing, the offering will make up 54.73 percent of the 592 million shares outstanding, suggesting a total market capitalization of up to $5.1 billion and total proceeds from the offering of up to $2.8 billion, Dow Jones said.

--SmartPros News Staff

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