Reader Responses November 4, 2002

SURVEY SAYS: Our Readers 'Take' on Andersen

April 11, 2002 (PLANSPONSOR.com) - Just when you thought no firm could implode faster than Enron, along comes Arthur Andersen.

Reported by

Nevin E. Adams

While it certainly seems that there were some ill-conceived acts going on in Houston…and there were questions about Waste Management’s financials…and while firms do routinely change auditing firms from time to time…the rapidity with which companies have walked away from their long-standing relationships with the auditing giant is striking.

This week, we asked readers if they thought the changes were warranted – or just a case of abandoning ship.

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The vote was perhaps more split than one might have thought – but more than 53% said they felt the actions of the firms removing Andersen were warranted under the circumstances. As one reader noted, ‘The reason that the name of an accounting firm has value on a financial report is that their reputation stands behind the numbers. If your firm name raises eyebrows, rather than confidence, your clients have to leave to protect themselves. Whether your particular branch office ever did anything wrong is immaterial.’

‘Well, you know how it
goes: “You reap what
you sow. All I can say
is, it’s harvest time.’

Another offered a more cynical assessment, ‘ My mother always said if you lay with dogs, you catch fleas. Rather than “rats” jumping ship, perhaps AAs (now) former clients are trying to avoid a trip to the vet for a flea dip.’

Still, there was a fair amount of sympathy for Andersen workers – and some incredulity at the speed with which Andersen’s troubles had supplanted Enron in the headlines. As one reader noted, ‘ These changes do not appear to be warranted at all. Obviously, there are some issues – but in this case, I do not believe that a few bad apples spoil the entire barrel. I’m certain there are many dedicated, highly competent and ethical people employed at Arthur Anderson. It’s quite sad that these long time relationships are severed so quickly. I would hope that each client that has left performed due diligence on their part and left because of their own concerns – but because of bad press. This situation certainly throws in our face the power of the press.’

One reader offered what seemed to be a particularly insightful perspective: ‘It seems that many of the clients that are leaving AA are overreacting. However, many companies would like to change their auditors and find it difficult because of long standing relationships and personal friendships with partners of the firms, etc. Also, some companies are reluctant to change auditors after many years with the same firm because it may raise eyebrows on Wall Street. This event is a “window of opportunity” for many of these companies to change accounting firms with no questions asked and no hard feelings.’

But as for this week’s Editor’s Choice : ‘Well, you know how it goes: “You reap what you sow.” All I can say is, it’s harvest time.’

Thanks to everyone who participated in our survey!

We asked readers if they thought the changes were warranted - or just a case of abandoning ship.

THE VERBATIMS

The bottom line is would you really want to present your annual report for your investors and the SEC with an independent auditor's opinion on your company's accounting practices with a signature from Arthur Anderson?

Unfortunately, just as the good reputation of a large firm is imputed to all its partners and employees, the same is true for a bad reputation. Unfair? Not really - just a general principle that holds true on both sides of the ledger.

My mother always said if you lay with dogs, you catch fleas. Rather than "rats" jumping ship, perhaps AAs (now) former clients are trying to avoid a trip to the vet for a flea dip.

Rat's from a ship for sure.

I would like to be a fly on the wall in many board rooms were they are discussing how to unravel many of the financing schemes that AA has established for them.

My opinion on the AA situation is that, in light of what appear to be questionable company-wide policies and procedures, those changing to another firm are justified. In fact, I think the whole situation will result in improvements for all - companies should not get so comfortable with their auditors, and auditors shouldn't be "rubber stamping" what companies want. Hopefully company boards are taking the selection of a new firm seriously, and perhaps considering limiting the term at the same time.

I think that there are several factors to consider. What is the true integrity level of Andersen's "Corporate Culture"? Is Andersen's seemingly "aggressive" rather than "conservative" approach to accounting in step with our Corporate desires? Will Andersen's legal and financial problems force it into bankruptcy and thereby forcing me into a decision about a critical major vendor who may no longer be there for me? If my needs are more regional than international, is my faith in the Andersen team handling my account stronger than any of the earlier concerns?

All in all, I am glad that our auditors (and tax consultants) are not Andersen so these matters are hypothetical (at least for now) for me. If we were an Andersen client, I would be recommending to the rest of the Board of our staid, old, conservative, New England company, that we find a new auditor.

I think that it's a smart move for most companies. Although Andersen may have done a fine job with no improprieties, continuing to be associated with Andersen may taint the company in the eyes of stockholders and potential investors.

It is amazing to me that so many large companies have given up on an entire accounting firm based on the actions of what will amount to very few individuals. Is it fear that they will be seen as legitimizing the acts if they do not switch firms? I cannot believe that the relationship with the local Arthur Anderson offices were so tenuous as to warrant "jumping ship". I think it is less a case of "jumping ship and more a case of the snowball rolling and many companies deciding to join the rest of the "flakes" rather than stepping aside.

I don't really have an opinion on this week's survey, except to say I don't think the auditor really matters. If the highest levels of management are willing to defraud their shareholders the auditors aren't going to figure it out. That fact goes to the inherent conflict of interest regarding
auditors. People tend to forget that all companies are clients to their auditors.

Of course the activity is not warranted. Anyone who thinks the behavior of a few individuals is an indication of the ethical lean of thousands of other accountants is a fool. Unfortunately, upper management at many firms make decisions based upon appearances, not facts, so goodbye Anderson.

I have to add that as unfair as I think this is to many, many good people at Anderson, I have to think the end result may be good for our economy if the destruction of Anderson serves as a warning to other accountants and accounting firms.

The execution of Arthur Andersen as a result of the Enron scandal is a national disgrace. There is no public good in the political destruction of such a fine firm. Was wrong done? Probably, but does it warrant 85,000 unemployed professionals? The client exodus is definitely rats leaving the
sinking ship, but who can blame them? The clients aren't at fault. It's the self-serving politicians and the over-zealous Justice Department.

As far as Andersen goes - as a bean counter myself - it saddens me to see professional reputations of the many fall prey to public opinion and fall so quickly because of the few in the Houston office. While the firm will fall the individuals will move on and survive. It's not like the work disappeared - only the venue has changed. Andersen's fall is another one of life's quirks although not on par with a 9/11 Windows on the World breakfast meeting. As the Taoists would say, "The earth doesn't care if you're happy."

Once again, Management would rather abandon ship then answer questions by stock holders. It has nothing to do with what is best for the Company, but what "looks good" to Wall Street.

If I was a board member or senior mgmt of a large publicly traded company that hired Arthur Anderson for auditing I'd be concerned with how confident the investment community would be with our audit and financial statements. The problem is probably more perception than reality but in this investment world "perception" takes precedent.

I would also be concerned with the quality of the staff that remains at AA and would be responsible for the engagement. It seems that the best staff are finding other firms and the less qualified staff have no options but to remain at AA.

I see no problem with companies walking away from an audit firm that used highly questionable practices in the audit of company financials. While I believe this goes on more frequently then we would like to admit to have it blow up is totally unacceptable. As clients walk away from Arthur Anderson the audit committee and others who dismissed them must think of their Fiduciary duty to the company, employees and shareholders. How can they in good conscience allow Arthur Anderson to remain as auditor when the government has indicted them? In this case innocent until proven guilty just doesn't cut it. An audit is suppose to give a level of comfort with the financials statements and the audit firm should be held in high esteem.

The question has become: "What is the value of an Arthur Anderson opinion." When that opinion is of questionable value, what company would want to pay for it. (Would you want to try to justify the retention of Anderson to your shareholders?) Auditors, perhaps more than most any other service business, must trade on their reputation. This one has become severely tarnished and therefore of little value.

The ousting of Anderson by many firms is warranted. If there is a lack of public/investor confidence in Anderson's work, it would be unwise for a company's Board of Directors to retain Anderson as auditor. Even though it is expensive to change auditors, audit services are fungable. In the final analysis, a professional firm that loses their reputation has little to
offer their clients.

The risk to a client of NOT changing auditors is that Anderson does not survive, and other audit firms who may be qualified to audit the company books are unable, due to high work loads, to accept the assignment. CPAs have a duty of professional care in the conduct of an audit, and should not accept an assignment that cannot be conducted in accordance with professional standards. Because of the tremendous lead time necessary to hire a new auditor, companies who don't change now will have little or no chance of changing later. I don't see the firing of Anderson by clients as "rats leaving a sinking ship". I see these changes as a business necessity.

I think it's prudent on the part of the companies leaving Arthur Andersen.
Investors are jittery enough these days without having to worry about how widespread the unethical behavior was at Andersen and whether it extends to other companies who they may invest in.

I think it's clear that Andersen was looking beyond their responsibility as an auditor to greener pastures in the way of consulting revenues. Whether the problems extend beyond the Houston office or not, this breach puts the entire company under a shadow of doubt.

Anderson has always been known within public accounting circles as one of the more aggressive auditing and tax firms available to public companies. So when the Enron, Waste Management and other companies imploded or came under SEC scrutiny, you knew their time had come to pay the piper. However, I don't think anyone who's ever worked in public accounting for Anderson and/or a competitor (like me), wanted or wished for them to be struck down like this. Ultimately, it will drive the cost of audits and tax services higher due to the surviving Big 4's increased regulatory burden, business insurance premiums and overall costs of doing business.

The DOJ indictment was the nail in the coffin to Anderson and punished thousands of employees who had no direct action in the wrongdoings of any of these companies. The DOJ indictment has also possibly ruined the "deep pockets" for most creditors looking to recoup their losses from anyone related to the failure (usually the public accountants), since it appears Anderson has had to spend their working capital in order to survive. Market forces and SEC securities violations would have taken care of Andersen's reputation and business model without any help from the DOJ.

Audit clients are overreacting and simply want to distance themselves from, what is presently, an unpleasant association.

It has become very difficult, given the media attention the Enron debacle has received, for any company to maintain a relationship with Anderson due to public, investor, and shareholder pressure. Is that fair? Probably not, but as my father always told me, life isn't fair.

I think the change is warranted. Auditors are supposed to be your trusted advisors and system of checks and balances. They have destroyed their credibility in that they obviously don't practice what they preach to their clients.

I feel that many offices and individual employees of Arthur Andersen are being unfairly judged and hurt in this "scandal."

It is prudent and warranted for any publicly-held company that is using Andersen as its auditor to change to another accounting firm. In today's capital markets where a stock is discounted for just the slightest bit of "smoke", a corporate board cannot risk their stock value just because of
the accounting firm they are using. For a privately-held company, it should not be as big an issue.

It is a case of rats abandoning a sinking ship.

I led the charge 16 years ago to dispose of the most arrogant, pompous, disengaged auditors I had ever met. Never looked back.

I don't understand why anyone would be loyal to them - now or ever.

Warranted, without a doubt. George Bush (the elder) said during his tenure as leader of the free world, and during some minor scandal or other at the White House, that we must avoid not only impropriety, but also the appearance of impropriety. (Iran/Contra apparently did not appear improper - but that's another story.) So too with auditors: publicly-traded firms need to show that they're fully above-board; ditching a proven weasler, regardless (or perhaps even especially because) of a long-standing relationship helps the firm keep its own reputation above-board.

Enron, Waste Management, Clobal Grossings, etc. It appears endemic. It give the impression AA auditors do not have the courage of their convictions against the consultant side or their clients. This impairs the ability of the firm's financial statement opinions to be trusted by the market, so thats why clients are jumping ship.

I think its rats leaving a sinking ship. No matter what, perception is reality. How a company is perceived means everything today. To be perceived as a winner you need to associate with winners. Unfortunately Andersen is perceived as a loser so everyone wants to distance themselves. The most important thing Andersen sold was trusted opinion. Since its no
longer trusted, its finished. Leave to a bear market to flush out aggressive accounting. The more the bear, the more we'll find. The more rats leaving, the more its warranted.

No. It isn't a case of rats abandoning a sinking ship.

It is the same thing we have all heard since childhood. Once you lose your good reputation there is no way to get it back. The one thing that a CPA has to sell more than expertise in accounting is integrity. Arthur Anderson no longer has a reputation for integrity. It isn't just ENRON. There have been other legal problems for the firm. ENRON is the last straw not the first. Even though it was quite a straw. You have to wonder if the firm even knew what the word independent meant when it functioned as an "independent auditor" of accounting systems it helped put in as consultants for a company which had outsourced its internal audit area to Arthur Anderson and which had hired many of its senior accounting staff from Arthur Anderson. If Arthur Anderson has/had an ethics policy it was nothing more than a sheet of paper.

Like Caesar's wife, I would expect a firm I hired as auditor and/or as financial consultant to be above reproach. I think the ethics of this firm are questionable. Yes, I would be one of the "rats" abandoning a sinking ship -- not because I didn't want to be the last "rat" on the ship but
because I would worry that there were questionable ethics in their dealings with me. Isn't trust one of the most important criteria in choosing an auditor? No, I don't trust Arthur Andersen.

It's sad. I have worked with AA representatives at three different firms (one in Houston) and have found them to have integrity and capability in audit procedures (although not always knowledgeable about employee benefit plans). The AA employees (which usually only goes as high as the audit manager) I work with now are the most capable and responsible I have ever had the pleasure to work with. For them to be impacted negatively by this is a travesty. I suppose clients must evaluate their situations independently, but I think a lot of firms (or the audit committees of their boards) are reacting to the media feeding frenzy and protecting their posteriors.

There are many thousands of very good A. Anderson partners and employees who are suffering because of the misdeeds of a few. While I have sympathy for them, I don't think they are the victims of unfair treatment. Why? Because the primary selling point of an accounting firm is its reputation. When a large firm builds a good reputation, everyone in the firm (even those who individually might even be of questionable repute) wear the same halo. As the firm continues to grow and prosper, it's because clients are drawn to the reputation of the firm, and they count on their CPA firm's good reputation to endear trust among their (the client's) shareholders, and public markets, and bankers, and the public at large. When that reputation becomes tainted, the clients must do what is best for themselves and their stakeholders. It is not unreasonable or irrational for a client to act in self-preservation and change their audit firm. It's only natural.

The Rats are abandoning ship- but I cannot say I blame them when CNN reporter last night said it appears that Arthur Anderson will no longer exist in 6 months. If it does survive it will be a shadow of its former shelf. Sadly I have friends who work for the firm. The partners they work for are actually very ethical people who are caught in a terrible disaster! No job is safe in these times- thousands of families are effected by a few unethical auditors! I know this is a private business but I still feel that someone could/should come in and save what is left of this giant and revive it! Some of their clients have no options (CYA).

The fallout from the Enron/AA issues has unfortunately affected thousands of "innocent victims". I am livid that the greed and stupidity of top management makes them feel they are beyond reproach. Thousands of peoples lives have been destroyed and these "victims" are paying the price. The top management that personally profited and made millions should be ordered
to reimburse the 401K /pension plans with the millions they were able to pocket.

It's unfortunate that so many companies are dumping AA, because then the fallout damage spreads further. Unfortunately it's a case of the rats leaving the sinking ship. An analogy: Could you really ever trust your spouse again if they flagrantly had an affair without remorse and then
denied their actions (i.e. shredding evidence)? Could you ever trust they would not repeat their actions?

Why hasn't anyone been charged at Enron? Yes, maybe Anderson is at fault, but the audit is only as good as the information provided. The thought of all those people without jobs because of one or a few people is just mind boggling.

It seems more like the "rats" theory, but my guess is clients of Arthur Anderson are dropping them in fear of being flagged for audits because Anderson because of the Enron connection.

I think that companies for whom integrity and unblemished appearances are critically important to their success are well served by switching their public accounting and auditing business away from Arthur Anderson, particularly before the remaining major accounting firms cannot absorb the
surge in new accounts. This is anything but rats bailing out before the ship sinks.

Anderson has put every business relationship they have into jeopardy because of the unmitigated gall of some key people to compromise the integrity and reputation of the firm. Shareholders and Boards should insist on audit, consulting and other business relationships that are beyond reproach. They should also be demanding the same of their own management. Unfortunately for some, greed and the desire/pressure for continuous earnings and stock growth has resulted in shady practices and looking the other way. The cynical side of me thinks it is probably more
widespread than we can imagine. I'm having difficulty getting in touch with my optimistic side lately.

An important function of an audit is to give credibility to the customer's books. If the auditor is no longer credible, it can not meet that need. Companies using Arthur Anderson for auditing should consider changing.

Rats abandoning a sinking ship. After the Enron situation has been in the news, people are afraid to work with Andersen. The news of the clients leaving them and the fear that the good people are also leaving has created the death spiral for Andersen.

Anderson certainly earned the fate that seems to be rapidly approaching for it by peddling "aggressive accounting" aka as tax evasion even more aggressively than its competitors. On the other hand, it is awfully convenient to blame what is an industry-wide practice on a few "bad apples" at one firm rather than imposing reasonable standards on the accounting industry as a whole.

I guess what bothers me is that Arthur Andersen is a huge firm -- not just one Arthur. Are we punishing the whole firm for the actions of a few or is there truly a bigger policy issue here that warrants these actions?

Even if you have a very good product or service some aspects of business are often very fickle and perception only. Most companies fall in the category of being somewhat mediocre as they aren't in danger of going under nor will they ever be the rule maker of their industry under current management or structure. Even if you use Arthur Andersen and your auditors happen to be
among the many good ones, most companies just don't have the time, energy, finances nor clout to weather another potential wart in the eyes of their customers and business partners.

Most folks out there still can't tell you what Enron does or what Arthur Andersen's involvement is but they do believe both are totally corrupt in every aspect. Unless you want to give your
profits away trying to educate those who don't listen about an industry other than your own just jump ship and work on your business. If you're a private company and your exposure is very limited you may be fine. If you're a public company and your stock is down and your shareholders meetingis coming up lose the baggage and focus on what really ills your firm.

Rats abandoning ship. Such a shame, too - especially for those who losing their jobs at Andersen who had absolutely nothing to do with the Enron account. Seems like just yesterday that a resume with "Arthur Andersen" on it was a plus. . .

I believe it seems more like rats abandoning a sinking ship. Its ironic, because if the rats would just stay on the ship, it probably wouldn't sink. It also seems like the bank run mentality ~ if everyone else is getting out, I better get out, too, because there might not be anything left for
me. I have several friends who work for Arthur Andersen and although the latest news reports say that their jobs are not being cut, I do worry about them.

Many public companies question whether Arthur Andersen will be around to serve their needs. Some who have stayed with AA have given their Boards permission to act unilaterally to select a new auditor in the event of a breakup or sale. The loss of Arthur Andersen as an international firm is a tragedy.

If you cannot trust your fiduciary, your CPA, who can you trust. Anderson got to go! I mean go to jail!

I do not think the changes are warranted. Andersen is being used as a scapegoat. The government is way out of bounds on this one. If we took down every organization for the alleged wrongdoing of a very few (one audit team out of thousands) then congress would be dissolved (many more congressmen have been accused of wrongdoing than auditors).

Why would any company executive wishing to preserve his employment present to their Board its intention to continue a long-term relationship with an auditing firm has a federal indictment against it?

Clearly, rats abandoning what appears to be a sinking ship. Condemning the whole company for the deeds of one or two branches of a worldwide network seems a bit unjust......no, a lot unjust. In truth, Arthur Andersen might now be the best choice for auditing services. With a stained reputation and loss of clients, they will probably be looking for ways to attract and retain clients by offering meticulous service at reduced rates...........IFthey can attract quality accountants to work for them. Guess it's the personification of the old adage "guilty by association". (No, I'm not a relative or close friend of any AA employee!)

If our auditor was Arthur Anderson I would be hard pressed to recommend that they be retained. The firm is not going to survive and it is time for its clients to change auditors.

Enron/Anderson has become such an emotional situation for so many clients. Out of fear people are acting without thinking through all the entire thing. Anderson has been a sound company for so long that it surprises me that people are judging he entire company on a few bad seeds. However, I can also understand why people are jumping ship. People are afraid of being accused of following similar practices. The media has not helped this.

From the first I've said that Arthur Andersen was going down. They should. They have conspired with a customer and undermined a profession. Auditors are independant. If you can't believe them, you can't believe Financial Statements and the stock market will surely crash again.

No doubt much of Andersen's marketing is based on name recognition...so,
when the name becomes synonomous with something undesireble it sould be
expected that the reverse effect of marketing will take place. Sorry, but it
is not the clients who are the 'rats.'

I believe that Arthur Anderson's business was built on a sterling reputation. Once that reputation was lost, so was the business. It was also over much more than a few misdeeds or mistakes in one office. From all appearances, the home office had full knowledge of what was going on
in Houston and even condoned and contributed to what was being done. This would lead most people to believe that Anderson's integrity was certainly "for sale". With that in mind, I don't believe that any public company could afford to be associated with Anderson and expect the public to believe any of their accounting results such as P & L's etc.

The reason that the name of an accounting firm has value on a financial report is that their reputation stands behind the numbers. If your firm name raises eyebrows, rather than confidence, your clients have to leave to protect themselves. Whether your particular branch office ever did anything wrong is immaterial.

I think one of the scariest things in the ENRON debacle is the fact that Arthur Anderson was a collaborator. Audited financial statements are key to making decisions on buying stock and shareholders and investment decision makers rely on their accuracy to make investments. If you can't trust the auditors to keep management honest, who can you trust? There are many dishonest people in this world, but who would have thought that greed could compromise the sterling reputation of a firm such as Arthur Anderson. I think that companies are leaving because they don't want to be associated with a firm whose reputation has taken such a beating and do not want their employees or shareholders to think they too may have something to hide. The auditing firms are voted on as part of most corporations annual meetings and since shareholders vote their proxies, the public sentiment may have something to do with the mass exodus from the firm. Sadly the majority of employees at the accounting giant are ethical, hard working, intelligent individuals who are being punished by the actions of a few. Would you want Arthur Anderson on your resume?

I think most of the clients who have ended relationships with Arthur Anderson have done so for one or both of the following reasons:
1) They want their stockholders to have confidence that the financials are "clean". How can you have faith in the work of an auditing firm commonly thought of as willing to break the rules for financial gain? By firing Arthur Anderson, these companies are trying to send a signal that they would never try to mislead the public.
2) Rats leaving a sinking ship - you don't want to wait to switch auditors until you find out that AA cannot perform the work due to staffing, litigation, or other problems.

However, I'm not convinced that other auditing firms have not made choices similar to those made by AA at Enron.

I don't think that just because one person at AA did what he did, that EVERYONE at AA would/do do the same thing. There's no guarantee that others at other similar companies aren't doing the same thing; just haven't gotten caught yet... I don't think companies want to be associated with AA right now, possibly thinking that an audit from AA would be subject to
closer scrutiny from here on out. I'm sure a lot of very good, reputable, responsible people are losing their jobs because of one less-than-scrupulous person. I wouldn't want to be him right now, probably will become a marked man....

I think this falls under the heading of "fool me once, shame on you...fool me twice, shame on me". I'm realistic enough to believe that this goes on elsewhere and that audit firms are now taking note...but wouldn't you put Andersen under the microscope too? Using the "prudent man" test, I'd have to side with the rats...Andersen made their bed and now they have to lay in it.

While I'm not an expert on the entire Enron issue and I'm not an accountant, I am extremely surprised that Arthur Andersen is completely falling apart. I would have expected the Houston office to have been cleaned out and re-organized; but the fact that this one incident is taking down the entire international company is just astounding. I really feel for the numerous good people who work(ed) for Arthur Andersen.

In an industry where one of the selling points is your thoroughness, attention to detail, and honesty, it won't take much of an appearance of impropriety to affect your reputation.

My mother always said if you lay with dogs, you catch fleas. Rather than "rats" jumping ship, perhaps AAs (now) former clients are trying to avoid a trip to the vet for a flea dip. These companies may have decided it made no sense to utilize a company that is so short-sighted and greedy it's partner/owners would cow-tow to unethical clients at the risk of the entire firm. Conscientious companies depend on auditors to help them oversee their assets and maintain practices that will ensure their own longevity. There is often great reliance on auditors that goes beyond required reporting, not to mention the outright hiring of accounting firms as consultants. If the company providing that service conveys that they don't "get it" via their own business practices, why should they be re-hired?

Perhaps this will be a wake up call for partners and managers in other CPA firms to do a better job of policing themselves and to think about something besides just this year's take of the profits. And we can only hope that the Enron executives are appropriately punished as the initiators of this flea outbreak. There are many to blame for what went of at Enron, but AA should have known what they were risking to continue working for them. AA should have blown the whistle and "jumped ship" themselves. No single client is worth this kind of fallout. This is a major slap in the face to the whole CPA industry. If CPA firms stood up to their clients and stopped lowballing to get business, they would have the clout to enforce the standards they are paid to uphold.

If Arthur Andersen was my CPA firm, I would fire them in a heartbeat. It would seem to me that continuing a relationship with a firm that now has a reputation for shady accounting practices and destruction of evidence would only serve to diminish the reputations of those who use them. They broke the law, they made up their own accounting rules, they deceived investors, and now they are going down the tubes because they got caught. It's a wake-up call for everyone else who has been doing the same thing. They were playing with fire and they got burned.

Years ago I lost a job for refusing to "cook the books" for the firm I worked for. No job is worth going to jail for.

As a CPA, it seems to me that Arthur Anderson is now learning the hard way what used to be understood by accountants with experience and taught to accounting students and upcoming accountants on a daily basis -- the most important thing you have to offer as an accountant is integrity. Once you have lost that, you are worthless as an accountant.

Would you want to invest in a company audited by AA? Their aggressive and creative accounting is the trademark of the firm. All of their clients need to take a hard look at their books. I am recruiting at local AA offices for my staff.

Accounting firms use integrity as their license to steal. They, when caught with their hand in the cookie jar fumble their torch and their light goes out, the dim wits that hired them to cast shadows, have no option but to seek other cover.

In my opinion, the heavy handedness of the Justice Department has caused irreparable damage to the firm of Arthur Andersen, and directors on the audit committees are acting with proper diligence to make sure they have an auditing firm lined up to sign off on statements. It is apparent to members of our audit committee that the firm will not survive in its present form, and we are merely hopeful that the people working on our job can be absorbed by another firm, so that we can have some continuity at least in the people on the audit, if not the company.

In answer to this weeks question:

This brings to mind the old adage:

Fool me once - shame on you!
Fool me twice - shame on me!

How can you blame companies for wanting to avoid being made the fool? Audit firms are in the business of trust. When they breach that trust, I can't blame people for walking away - for some, there's just too much imbedded risk in sticking with them, risk that can be avoided by going elsewhere for audit services.

My first comment is why is Arthur Anderson )AA) the scapegoat for Enron? While AA may be guilty of shredding documents after they were told not to (and possibly more), Enron after all is the company that instigated/developed/implemented the trip down slippery slope of questionable accounting practices then allowed high level executives profit extremely from the results of the practices. To respond to whether the AA existing client who are leaving them in times of trouble are "rats leaving a sinking ship", I would say no. Having been caught/cited for wrong doing once is excusable, but not to have corrected the internal problem that caused the first "wrong doing" (Waste Management), tends to say to clients that they would rather take their chances with their
existing practices and earn more money than do the right thing.

Unfortunately, as in most cases, these policies are developed/implemented by a few high level executives and they wind up hurting the reputation and careers of the majority of good employees (just like Enron). I applaud the AA employees who have taken their plight to the press. My final analysis is that satisfied AA clients who had good, legal, moral (in the sense of fair) contracts with AA, should not abandon them.

A good firm overall. Company's are abandoning because they do not want to be associated with the Enron problems.

The manner in which AA has been treated by its clients/former clients does seem reasonable if you consider Enron, Waste Management, Global Crossings. At the very least it indicates senior management was/is not in control of the firm. What else could surface has become a real concern.

I have long been opposed to the "creative accounting" I have seen over the years. If an accounting firm suggested it to me, I'd be gone like a shot. Many of these are marginal at best and all done in the name of greed or that great God - "profit". Looks like there will be a lot more policing of this sort of thing now and there should be. Two and Two should still equal Four - not 100!

"Longstanding relationships aside, it is most difficult for various companies Audit Committees to stand up for Authur Andersen and re-appoint them for, what is essentially a commodity business. The Audit Committees have constituants to respond to (i.e., shareholders), who read the papers, and unfortunately for A.A., sometimes perception is reality, and what might be one bad apple could spoil it for all of the rest of the clients they have served."

My vote is that companies are taking the easy way out, i.e. appeasing employees and shareholders by making a change rather than showing in confidence in their particular audit team. There's risk in moving to a new auditor and bringing them up to speed on your corporate situation and issues and certainly some monetary impact in the work involved in making the
change. I think it's clear to most people that not every employee at Andersen is incompetent.

Survey reply - RATS!!!

Enron seems to have vanished from the news-curious. Andersen has been destroyed by the Justice Department-a scapegoat? Where are Justice, the SEC, various Presidential Administrations and Congresses, all of whom are supposed to head this sort of thing off before it occurs, in terms of accountability?

These changes do not appear to be warranted at all. Obviously, there are some issues -- but in this case, I do not believe that a few bad apples spoil the entire barrel. I'm certain there are many dedicated, highly competent and ethical people employed at Arthur Anderson. It's quite sad that these long time relationships are severed so quickly. I would hope that each client that has left performed due diligence on their part and left because of their own concerns - but because of bad press.

This situation certainly throws in our face the power of the press.

The change from Arthur Andersen is warranted, given:

- The huge fraud perpetrated by Enron, which shows a fundadamental flaw in the
supervision of grey-area practices by client
- The ability of a partner to systematically destroy records (and, presumably,
the retention of records which should have been routinely destroyed), showing a
fundamental flaw in their records retention management.
- The poor way the whole process was handled in the press by AA management
- The potential for the firm to go bankrupt due to the inability to pay claims
related to Enron and other troubles.

In the first twenty years of my career, I worked for companies audited by AA, and they once made me an offer to work for them It was an organization excessively focused on results at the expense of people ("We will finish this audit on time, on budget, no matter who collapses from exhaustion or gets divorced"). Such an environment drives out people of strong character and
makes it more likely that questionable practices by successful managers will be overlooked.

As a CPA and CFO of a small company, I am very shocked by the rapid decline of Arthur Andersen. My frustration is that while this firm has been involved with several companies with serious problems on their financial reporting, many, many more CPAs are working hard every day to abide by all of the rules and regulations to present a fair statement of their company's financials. The companies that have left Arthur Andersen should leave a company that put itself in this kind of a position. But, this does not mean that all accountants try to break the rules and hide valuable information. One of the fundamentals of being a CPA is ETHICS! Arthur Andersen deserves what they have received - they broke the trust and have lost their business.