Prosecutors are set to charge several certified public accountants at a Japan unit of the PricewaterhouseCoopers group with collaborating with executives at Kanebo Ltd. in an accounting fraud that has humbled the once premier cosmetics and textile company, according to investigative sources.

The sources alleged that the accountants at ChuoAoyama PricewaterhouseCoopers worked with two executives in producing consolidated financial statements that concealed a 81.9 billion yen capital deficit in fiscal 2001 and a 80.6 billion yen deficit the following year.

The two executives are former President Takashi Hoashi and Vice President Takashi Miyahara, according to the sources. They have been indicted for falsifying the company's consolidated account statements.

Special investigators from the Tokyo District Public Prosecutor's Office have already searched the Tokyo head office of ChuoAoyama and other locations and questioned at least four accountants who audited Kanebo's books at the time of the fraud, the sources said.

The accountants have denied these and other allegations concerning doctoring financial statements, saying they did not intentionally overlook irregularities, according to the sources.

According to sources at Tokyo-based Kanebo, some accountants pointed out irregularities when statements for fiscal 2001 were produced in May 2002, but no demand was made to have the statements corrected, resulting in an audit approval.

ChuoAoyama is a major accountancy firm with more than 1,300 CPAs. It was targeted in damages lawsuits filed by shareholders of major companies that collapsed after accounting frauds such as those involving retailer Yaohan Japan Corp. and Yamaichi Securities Co.

Kanebo is currently undergoing restructuring under the government-backed Industrial Revitalization Corp. of Japan.