Michael J. Missal concluded that New Century engaged in at least seven improper accounting practices in 2005 and 2006.

Missal also found that senior management at the Irvine, Calif.-based lender failed to take appropriate steps to manage rising risks caused by the company's aggressive approach to originating loans, often to borrowers who couldn't afford them.

In addition, the examiner found that New Century's accounting firm, KPMG LLP, enabled some of the improper accounting practices to continue.

As a result, Missal said, investors and others may have legal ammunition to sue New Century, its top executives and KPMG for damages. It will be up to the trustee appointed to liquidate the company to determine whether to take any legal action based on the findings in the report, Missal told The Associated Press.

New Century spokesman Ronald Low said the company was pleased the examiner's report has been completed so that the company's plan for liquidation can continue.

A call to KPMG was not immediately returned.

New Century had been the second-largest originator of subprime home loans in the U.S. and had a market capitalization in excess of $1 billion several months before seeking Chapter 11 bankruptcy protection in April 2007.

The company collapsed after a spike in mortgage defaults on loans made to borrowers with past credit problems led New Century's lenders to pull funding and demand that it buy back bad loans.

As its financial footing slipped, New Century also warned that it would need to restate financial results from 2005 and 2006 because it failed to tally losses from loan repurchases.

Judge Kevin Carey of the U.S. Bankruptcy Court in Wilmington, Del., appointed Missal last June to examine New Century's accounting practices.

Missal said he conducted more than 100 interviews with New Century employees and others, including New Century's former chief executive, Brad Morrice.

Missal issued a preliminary report in November and a final version at the end of last month, but it was sealed until Wednesday.

KPMG severed its ties to New Century a few weeks after the lender sought bankruptcy protection. KPMG did not complete an audit of New Century's 2006 financial results before it resigned as its independent auditor.

New Century has been deluged with investor lawsuits and disclosed last year that it was the target of a criminal inquiry by federal prosecutors in California.

The order appointing Missal to investigate New Century required him to cooperate with any requests from government agencies, such as the FBI or the Securities and Exchange Commission.

Missal declined to say Wednesday whether he was asked to cooperate with any law enforcement agencies investigating New Century.

Earlier this year, the Federal Bureau of Investigation disclosed that it is investigating 16 unnamed financial institutions for their role in the subprime mortgage meltdown.