The SEC is maintaining that accounting done by Arthur Andersen for client, Waste Management Inc., may have crossed accounting independence lines and is adding fuel to the independence fire.
The Wall Street Journal reports that, âThe case is shaping up as a possible centerpiece of a campaign by the SEC to demonstrate that conflicts of interest can be caused by the proliferation of consulting and other non-auditing services that numerous accounting firms routinely offer.â
Apparently an internal probe into Waste Management a few years back revealed the possibility of accounting that caused the company to have to pay a $3.5 million charge in 1998 and inspired the shareholders to file a suit against Arthur Andersen. The Big Five company agreed to settle for $220 million.
Reportedly, work done between 1991 and 1997 helped Andersen collect $50 million in consulting service fees and $10 million in fees from audit work. The Wall Street Journal reports that the SEC is trying to determine if Andersen auditors âlooked the other way to keep consulting fees flowing.â