Mercury Finance, the subprime auto lender, announced Tuesday that it will replace its auditor, KPMG Peat Marwick, with Arthur Andersen LLP.

The move comes on the heels of a restatement of earnings for the last several years and the departure of Mercury's comptroller, which touched off a federal investigation.

In a written statement, chief executive William Brandt said Mercury would be "best served by a new public accounting firm, which can bring a fresh independent point of view to the situation."

KPMG said in a written response that it was disappointed with the decision. It said it had discovered accounting irregularities while conducting its 1996 audit and notified Mercury's board.

Arthur Andersen will be conducting a forensic audit that will examine Mercury's books for the last four years, said a source close to the lender. The in-depth review is necessary for Mercury to secure the long-term financing it needs to avoid bankruptcy, he said.

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