KPMG could be put on probation for less than 18 months as part of a settlement with US authorities over the accounting firm's past sales of tax avoidance schemes.

The settlement is close to being finalised, according to people briefed on the case, and an announcement could come this week.

KPMG's US business has been in talks with the department of justice about a deferred prosecution agreement, under which it would be put on probation and criminal charges held in abeyance. The probation period is between 12 and 18 months, the sources said.

Some deferred prosecution agreements have put companies on probation for three years, and KPMG believes a timescale of less than 18 months would prevent an exodus of its audit clients, said the sources. They said the timescale would reassure audit clients that a line could be drawn under the affair relatively quickly.

As well as the length of the deferred prosecution agreement, recent talks about a settlement have focused on the role of an independent monitor at KPMG's US business.

David Kelley, the US attorney leading the criminal investigation into KPMG's sales of tax avoidance schemes to wealthy individuals between 1996 and 2002, is believed to be pushing for the monitor to have wide-ranging rights to scrutinise the firm.

Any settlement could also involve KPMG's US business paying a fine of up to $500 million. A report in February by the Senate permanent subcommittee on investigations concluded KPMG sold "potentially abusive tax shelters" from 1998 to 2003.

KPMG is desperate to avoid a trial of the firm on criminal charges over its past tax work because it fears its audit clients would desert it.

Andersen, once the world's biggest accounting firm, lost audit clients after the justice department pressed criminal charges against its US business in 2002 for obstructing an investigation into the Enron scandal. Andersen subsequently collapsed.

The justice department is believed to be considering criminal charges against some former KPMG partners.

KPMG's US business has severed ties with more than 30 partners since reviewing its tax practice, said people briefed on the case. Some were fired, while others were encouraged to leave.

Mr Kelley's New York office and KPMG's US business declined to comment. - (Financial Times Service)