NEW YORK (CNN/Money) - The Securities and Exchange Commission on Monday accused accounting firm Ernst & Young LLP of violating auditor independence rules while handling the books of PeopleSoft Inc.

The SEC said from 1994 to 2000, Ernst jointly developed and marketed a software product with PeopleSoft while acting as its accountant. The Commission also said Ernst earned "hundreds of millions of dollars" in consulting fees for implementing PeopleSoft software for third parties.

The SEC added that Ernst "closely coordinated and jointly marketed its implementation services with PeopleSoft (PSFT: Research, Estimates), including reciprocal endorsements of each other, links to each other's Web sites, holding themselves out as 'business partners' of one another, and sharing customer information, customer leads and 'target accounts.'"

The Commission said it is seeking an order requiring Ernst to stop all violations and disgorge all relevant audit fees. It will also seek futher sanctions, such as a possible fine, for improper professional conduct.

Ernst & Young said it would defend itself "vigorously," asserting that issues relating to its consulting business, which it sold to Cap Gemini in 2000, have no bearing on its current business and also calling the software licensing agreement "purely historical."

"Given the many financial reporting and accounting challenges facing the business community, the accounting profession, and the SEC, we are surprised and disappointed that the SEC has chosen to take action on this matter," the auditor said.

"Our conduct was entirely appropriate and permissible under the profession's rules," Ernst & Young said. "It did not affect our client, its shareholders, or the investing public, nor is the SEC claiming any error in our audits or our client's financial statements as a result of them."

Ernst & Young said the licensing agreement for the software was terminated "years ago" and the PeopleSoft version of the product is no longer sold.

The issue of auditor independence has been in the spotlight since the collapse of energy company Enron Corp. Auditor Arthur Andersen is currently standing trial for obstruction of justice in matters relating to the Enron bankruptcy.