The Oslo district court found that the group had been negligent in auditing the books of Finance Credit, which went bankrupt in 2003 owing about 1.3 billion kroner ($200 million) to eight banks.

The court said that as the auditor, the firm had a duty to ensure that Finance Credit's books accurately reflected its finances, and ordered KPMG to compensate creditors through the defunct company's bankruptcy administrator.

In addition to the damages, the court ordered KPMG to pay 6.5 million kroner ($1 million) in legal costs.

KPMG said it seemed strange that an auditor would be held responsible when the accounts it was reviewing were falsified with criminal intent.

"KPMG is very surprised and very disappointed by the ruling," said group partner Tom Myhre. "There was massive economic crime by a number of people in the leadership of Finance Credit."

Finance Credit offered collection agency services, which means it bought unpaid debts from other companies, then sought to collect the funds plus fees.

One of its founders, Trond Kristoffersen, was sentenced to nine years in prison and ordered to pay 1.2 billion kroner ($185 million) in damages for fraud, hiding assets and accounting violations.

The court said Finance Credit exaggerated its assets, including the value of goodwill, leading creditors to believe that the company was an acceptable loan risk.

The court said that by the end of 2000, the group in reality was insolvent, and that KPMG should have seen that in its annual review of the company's books.

"As auditor, KPMG should have uncovered that the largest assets listed by the company was the value of goodwill, and that the goodwill was significantly overvalued," the ruling said.

KPMG International describes itself as a cooperative that serves as a coordinating entity for a network of independent member firms. The Norwegian branch employs about 700 people.

-- Doug Mellgren (Associated Press Writer)