Joseph F. Berardino, managing partner and chief executive officer of Andersen Worldwide, S.C., announced this weekend that former Federal Reserve Board Chairman Paul A. Volcker has agreed to chair an Independent Oversight Board (IOB) to work with Arthur Andersen LLP in making fundamental changes in its audit practice.
The Oversight Board will have wide authority in revamping the accounting company's business practices in order to help restore public trust in Andersen as well as the entire accounting profession.
Mr. Volcker will not receive any compensation for his role in chairing the Oversight Board. According to terms of the contract with Mr. Volcker, "the Oversight Board will have the authority to (1) mandate revisions to policies and procedures and/or to implement such additional policies and initiatives as it deems necessary or desirable and (2) advise Arthur Andersen LLP with respect to the assignment and retention of key personnel, and Arthur Andersen LLP agrees to be bound by the determinations of the Oversight Board with respect to all such matters (except to the extent such determinations may cause Arthur Andersen LLP to be in violation of any legal, regulatory or other professional requirements). The Oversight Board shall have full access to all necessary information and full administrative support and shall have the right to hire its own outside staff, counsel and advisors. All decisions concerning the selection of staff, counsel and advisors shall be in the sole discretion of the Oversight Board."
"There's no chance I would be here unless I thought we'd have unprecedented authority" in reforming the firm, Mr. Volcker said. "Accounting and auditing in this country is in a state of crisis. It's important that this be cleaned up and changed."
Among the initial steps announced this weekend, Arthur Andersen LLP will:
- No longer accept assignments from publicly traded U.S. audit clients for the design and implementation of financial information systems. The firm will fulfill existing commitments.
- No longer accept engagements to provide internal audit services to publicly traded U.S. audit clients. The firm will fulfill existing commitments or, if clients prefer, immediately enter into discussions to develop an appropriate transition.
Mr. Berardino emphasized that these actions are the beginning of a broad re-examination of the firm. "The overriding purpose of these measures — and those that follow — will be to provide assurance to clients and the investing public that the firm will be restructured to achieve one essential objective: quality auditing," he said.
The announcement came on the weekend before Mr. Berardino is scheduled to testify in front of the House Financial Services Committee on Andersen's role in the Enron debacle.