In light of the recent Enron failure and Big Five firm Andersen's association with Enron's audit, Andersen may have to make some tough decisions in the year ahead.

Speculation and rumors have persisted in the past year that Andersen has had discussions with other Big Five firms regarding a possible merger. If anything does ever happen between Andersen and another firm, it is not likely that negotiations for any merger will occur until the dust, and the litigation, settles regarding the Enron affair. Industry analysts continue to speculate that Andersen will be ripe for a merger when all of this brouhaha has ended. Andersen maintains that the rumors are just that - rumors.

In its latest issue, Strafford Publications' Consulting Alert newsletter suggests the possibility of an Andersen merger with either KPMG or Ernst & Young and feeds the rumor mill with two additional speculations:

• Because both of these Big Five firms have divested themselves of their consulting practices to maintain auditor independence in light of recent SEC regulations in this area, it would appear that Andersen would be faced with the same need for divestiture, should such a merger occur.

• Andersen could consider moving forward with a divestiture of its consulting group while still ironing out the details of the Enron situation, thus positioning itself for a merger once the lawsuits have ended.