Texas Moves to Revoke Andersen's License

In an unprecedented move in the State of Texas, the Texas State Board of Accountancy has filed a notice of complaint through the Office of the Attorney General to revoke the license of beleaguered accounting firm Andersen, prohibiting it from doing audits in the state. The move comes as a direct result of activities related to the handling of the Enron audit.

An Administrative Law Judge will hear arguments sometime over the next couple of months to determine if there is merit for revoking Andersen's license. Additionally, the State Board of Accountancy is seeking administrative fines and penalties in excess of $1 million.

According to the complaint, the Board of Accountancy charges Andersen with violating the Public Accountancy Act and the Rules of the Board in the following ways:

  • Andersen's audits of Enron from 1997 - 2000 were not in compliance with GAAP or GAAS, which is a direct violation of Board Rules 501.60 and 501.61.

  • Andersen either knew the financial statements were false and misleading or they did not have the proper procedures in place to determine that representations made by Enron management were false.

  • Despite the false and misleading nature of the Enron financial statements, Andersen has subsequently refused to withdraw its audit opinion of the bankrupt energy company.

  • And finally, the Board charges that Andersen "committed acts discreditable to the profession" by preparing misleading financial statements, which is also in direct violation of Board rules 501.90(2) and (8).

The notice further describes Andersen's lack of independence in performing the engagements for Enron, describes acts of document destruction which brought "discredit to the profession," and violations of the rules of professional conduct.

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