Lancer Corp. has expressed surprise at the findings of its outside auditor KPMG. The company, which is under investigation by federal prosecutors and securities regulators following allegations about its dealings with Coca-Cola Co., saw the auditor resign its position on Monday.

KPMG had concluded that there were "likely illegal acts" at the drinks-equipment supplier. Lancer president Christopher D. Hughes said yesterday that the company is "surprised and obviously disappointed" at KPMG's conclusions.

Lancer, and its biggest customer, Coca-Cola Co are under investigation by federal prosecutors and securities regulators who are looking into allegations that the companies engaged in improper accounting in an effort to boost sales of iFountain, a new fountain dispenser.

Lancer received a letter from KPMG on Monday announcing its decision to resign as outside auditor.

But Lancer said an independent investigation by its audit committee didn't find sufficient evidence of "intentional misconduct" or "accounting irregularities."