Arthur Andersen hiring former Fed chairman for oversight board
Monday, February 4th 2002, 12:00 am
By: News On 6
NEW YORK (AP) _ Arthur Andersen LLP, the auditor under fire for its handling of Enron Corp.'s financial books, says it has brought in former Federal Reserve Chairman Paul Volcker to help it make fundamental changes in the way it does business.
Volcker will chair an independent oversight board that will have wide authority in revamping the accounting company's business practices, said Joseph F. Berardino, chief executive of Andersen Worldwide SC.
``We've had a major letdown in our whole process,'' Berardino told reporters Sunday. ``There are fundamental questions in terms of the principles being used. It's obvious the public has been let down, and the question is what should their expectations be.''
Volcker, who is not being paid for his services, told reporters he was satisfied that he would have enough authority to get Andersen to adopt whatever reforms his panel favors. He declined to give a specific time frame, but said he hoped the work would be complete within 18 months.
``There's no chance I would be here unless I thought we'd have unprecedented authority'' in reforming the firm, Volcker said. ``Accounting and auditing in this country is in a state of crisis. It's important that this be cleaned up and changed.''
The announcement of Volcker's appointment came one day after an internal probe into Enron's financial practices criticized Andersen's conduct in the Enron debacle, which led to the largest bankruptcy in U.S. history.
``The evidence available to us suggests that Andersen did not fulfill its professional responsibilities in connection with its audits of Enron's financial statements, or its obligation to bring to the attention of Enron's board .... concerns about Enron's internal controls,'' according to the probe, which was done by a special committee of Enron's board.
Andersen had already taken steps to restore its public image, including firing David Duncan, a partner who allegedly had a hand in shredding documents related to Enron's financial collapse. It has also asked former U.S. Sen. John Danforth to review the company's records management policy and to recommend improvements.
As an initial step in its reforms, Berardino said Andersen would no longer provide certain kinds of consulting services to companies whose books they are auditing. Three of the other five major accounting firms have already endorsed such limits, leaving Deloitte & Touche as the only large firm that has not taken a position on the issue.
``Real people got hurt'' in the Enron debacle, Berardino said. ``We understand that. The question is what can we do better. ... I think you're going to see a fundamental restructuring of the accounting industry in the United States.''
Rep. Jim Greenwood, chairman of the House oversight and investigations subcommittee, reacted skeptically to the hiring of Volcker.
``They need to come forward and say `we blew it' and that 'we're now going to change from within,''' Greenwood, R-Pa., said on CNN's ``Late Edition.'' He said that instead, Andersen had placed the blame on Duncan, the Houston auditor in charge of the Enron account.