Andersen Negotiating Merger; Volcker Announces Changes

Andersen is immersed in heavy negotiations with rival Big Five firms, hoping to reach an agreement to form some sort of business combination by the end of this week. Early reports indicated that talks with Deloitte Touche Tohmatsu were in advanced stages, but all of the other four accounting giants have been speaking with Andersen. In addition, reports have emerged indicating that KPMG is interested in acquiring Andersen's European operations.

Ernst & Young officially confirmed on March 13 that they are not interested in a business combination with Andersen as long as the Enron-related liabilities remain unresolved.

Industry experts say that a deal with one of the large accounting giants could be announced as early as the end of this week.

Geoff Brayshaw, president of Australia's Institute of Chartered Accountants, expressed concern about a potential merger, warning businesses that they face less choice and that conflicts of interest will escalate if the Big Five becomes the Big Four. "If someone wants to do independent work and you don't want to have the auditors do it, you're down to three [choices]. You very quickly start to lose the competitive market of the work you want the firm to do if you can't ask people to do something because there's already an association."

Paul A. Volcker, chairman of the Independent Oversight Board that was created to develop a plan to protect the integrity of Andersen's audits, announced the decisions that the board has made to date. Should Andersen not reach a merger agreement with another Big Five firm, Volcker's group is calling on Andersen to separate its auditing and consulting practices and follow a disciplined procedure to better assure the integrity of the audit process.

Volcker also stated that, should Andersen remain independent, it will not be a strict "audit only" firm, but will continue to provide certain tax services as well as helping clients with due diligence for mergers. However, Mr. Volcker's report stated, "As this reorganization is completed, there will be no partner interlocks, no revenue- or profit-sharing, and no cross subsidies between the 'auditing' and 'consulting partnerships.'"

Meanwhile it appears that Andersen will add federal obstruction of justice charges to its list of investigations and lawsuits.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.