Another big accounting firm, KPMG, has been dragged into the widening probe of the cooked-books epidemic in corporate America. 

The accounting firm said yesterday the Securities and Exchange Commission may file fraud charges against the firm for its role in Xerox (XRX)'s accounting scandal. 

KPMG, the auditor for 30 years, said it was fired by Xerox for refusing to sign off on Xerox's annual report for 2000 unless auditors could do a broader internal probe of books. 

Xerox later came under two federal investigations of its books. Last week, Xerox settled the claims from the probes and agreed to pay a record $10 million to put the matter behind it and restate earnings for five years. 

The SEC is now going after executives at Xerox who handled the accounting controversy - including former Chairman Paul Allaire and former CFO Barry Romeril. They were summoned to appear at an SEC inquiry as a prelude to possible fraud charges, according to the Wall Street Journal

Allaire, 63, who resigned four months ago with a $1.09 million annual pension and stock currently worth about $27 million, also has insurance to help his defense. 

KPMG's partner in charge of the Xerox account, Michael Conway, also is targeted in the expanded SEC probe. 

KPMG said it tried to do the right thing with Xerox's books but was fired six months ago. It said it had done nothing wrong. 

Meanwhile, a sister spin off of KPMG - the lucrative consulting business with the similar name KPMG Consulting - is looking at changing its name to distance itself from any tainted image. 

KPMG Consulting went public a year ago when KPMG separated its auditing and consulting businesses. KPMG Consulting is expected to pick up some of the consulting business being lost by Arthur Andersen.