Accounting groups KPMG and Ernst & Young have been cleared of responsibility for a $1.7 billion accounting fraud at Japan's Olympus Corp, one of the nation's worst corporate scandals, in a report issued on Tuesday by a company-appointed panel of lawyers.

The panel placed the blame on five current and former internal auditors, which it said were responsible for 8.4 billion yen ($109 million) in damages.

Olympus has been found to have used improper accounting to conceal more than $1 billion in investment losses under a scheme that continued for 13 years from the 1990s, when Japanese stock markets had fallen heavily and the yen strengthened markedly.

KPMG's Japanese unit, KPMG AZSA LLC, was the firm's external auditor until 2009 when local rival Ernst & Young ShinNihon LLC took over as outside auditor.

The roles of both firms have been questioned because they signed off on Olympus' parent accounts despite a string of questionable deals over the last decade, which were later found to have been at the heart of the cover-up.

But the panel said neither KPMG AZSA nor Ernst & Young ShinNihon were found to have violated their fiduciary duties.

The scheme, which a separate panel has concluded was engineered principally by two former Olympus executives, relied on transactions that were presented in financial statements as legitimate acquisitions or investments.

It was only late last year that some of these deal payments were exposed to be shams, especially a $687 million advisory fee paid to a boutique U.S. financial firm for the $2 billion acquisition of British medical equipment firm Gyrus in 2008. At a third of the purchase price, the fee was the world's largest.

The panel's report said former standing corporate auditors Minoru Ota and Katsuo Komatsu, current outside corporate auditors Makoto Shimada and Yasuo Nakamura, and current standing corporate auditor Tadao Imai had breached their fiduciary duty.

The panel held Ota responsible for 3.7 billion yen ($48 million) in damages. He headed the accounting division in the 1990s, when the fraud began.

The other four were collectively held responsible for about 4.7 billion yen in damages because they overlooked Olympus directors' illegal activities, it added.

Olympus is expected to bring a damages suit against the five as early as Tuesday, according to the Nikkei business newspaper. It is already suing its president and 18 other executives, past and present, for up to 3.6 billion yen in compensation.

Olympus President Shuichi Takayama will hold a news conference on Wednesday at 1 p.m., the company said, to discuss its response to the panel's report.

Olympus shares showed little reaction to the report, rising 0.9 percent to 1,192 yen, compared with a 0.5 percent rise in the benchmark Nikkei average.

(Reporting by Yoko Kubota and Nobuhiro Kubo; Writing by Mark Bendeich; Editing by Chris Gallagher)