Kmart tip-off sparks accounts probe

KMART raised the spectre of another major accounting scandal as America's Securities and Exchange Commission launched an investigation into alleged financial irregularities.

The US retailer, the largest ever to file for Chapter 11 protection from its creditors under America's bankruptcy laws, said it had received an anonymous letter from employees expressing concern over accounting matters. The board promptly authorised an independent review. PricewaterhouseCoopers is the company's main accountant.

The SEC also received the employees' letter and Kmart said that it is co-operating fully with the regulators.

The news, coming on the heels of the Enron scandal, is a setback for the retailer and Ronald Hutchinson, a turnaround expert brought in to manage Kmart's financial restructuring under Chapter 11.

Kmart, which has 2,100 stores and about 250,000 employees, had hoped to emerge from bankruptcy by 2003, but if accounting irregularities are established, this could complicate the company's recovery prospects.