At the first meeting of Arthur Andersen's Independent Oversight Board on February 27, 2002, Chairman Paul Volcker announced the formation of an Advisory Panel and established an agenda of priority issues.
The priority issues to receive prompt attention include quality control, so-called "revolving door" policies, and the firm's incentive plans. The complete list is as follows:
- Strong control procedures to assure prompt resolution of technical accounting issues in a timely, consistent and authoritative manner that respects the intent of established standards.
- Measures to maintain audit quality and discipline, including effective procedures for meaningful internal and external review of audits.
- Resolution of questions of client retention by senior partners, with their review and decisions adequately documented.
- Enforcement of appropriate restrictions with respect to the future employment of Andersen personnel by audit clients.
- Review of compensation, profit-sharing and other business practices and policies that could impair or have the appearance of impairing the independent judgment of auditing partners.
In announcing the agenda, Mr. Volcker said, "The work of this Board in the weeks and months ahead will focus on assuring that Arthur Andersen will have in place the talent, resources, policies, and procedures necessary to maintain confidence in its audits and restore the firm to its leadership position in the audit community."
Some observers worry that changes in the firm's incentive plans will defeat the winning formula that helped Andersen achieve its leadership position in the first place. (Volcker board to examine Andersen's pay structure, Chicago Tribune, February 28, 2002.) But the Board will have good counsel to draw on in making its decisions.
Oversight Board and Advisory Panel
Joining Mr. Volcker on Arthur Andersen’s Independent Oversight Board are Charles Bowsher, former Comptroller General of the U.S. and chairman of the profession's Public Oversight Board (which is set to disband by the end of March, 2002), and Dr. P. Roy Vagelos, retired chairman and chief executive of Merck & Co.
In addition, William C. Mutterperl, former general counsel and secretary, executive vice president, of FleetBoston Financial Corp, will serve as executive director of the Board, and the Board will be assisted by an Advisory Panel of experienced auditors, public officials and educators. The advisory panel will be led by Russell E. Palmer, former chairman of Touche Ross & Co., (now Deloitte and Touche) and former dean of the Wharton School at the University of Pennsylvania.