THERE IS NO reason to doubt that the Justice Department could present before a federal grand jury a provable indictment against the accounting firm KPMG LLP. For one thing, the company doesn't really deny it. A few years ago KPMG promoted tax shelters to individuals and businesses -- shelters that were designed to create paper losses to reduce or eliminate tax liability on large gains and that the firm now concedes were over the legal line. In a statement last week, it bluntly conceded that it "takes full responsibility for the unlawful conduct by former KPMG partners . . . and we deeply regret that it occurred." What's more, the firm's hardball tactics in defending itself since have apparently exposed it to plausible obstruction-of-justice charges as well. The federal government has a legitimate interest in prosecuting those responsible, both as a matter of accountability and as a deterrent to similar misconduct by others.

Yet it's hard to see the good that could come of indicting KPMG as a firm, as the department is reportedly considering. Such a move would probably put the company out of business, much as the indictment of Arthur Andersen LLP -- whose conviction the Supreme Court recently overturned -- effectively shut down that accounting firm. This would leave KPMG's more than 18,000 employees out of work, and it would leave its many clients scrambling to comply with corporate reporting requirements. Perhaps more important, in the long run it would reduce the number of major accounting firms from four to three, hurting competition in a market that could use more big players, not fewer.

These are, admittedly, public policy concerns, not evidentiary questions about the case that the department could muster. But when prosecutors are considering a step that would have profound consequences for markets and competitiveness, they need to consider such matters. KPMG has forced out the partners responsible for the problem and is apparently prepared to cooperate in prosecutions of individuals -- which would have far greater deterrent value than a corporate indictment. It is also prepared to pay a large fine and enact management reforms overseen by a government monitor. This seems a responsible outcome. A company, after all, can't go to jail, but it can be destroyed. Destroying another major accounting firm would be a Pyrrhic victory indeed in the fight against abusive tax shelters.