After 72 hours of deliberations over 10 days, a jury in Houston, Texas, has effectively killed the accounting firm Andersen. The jury found Andersen guilty of obstruction of justice. Andersen will appeal the decision, but it is only a matter of time before the firm closes. As the auditor of the failed Enron Corporation, Andersen signed off on financial statements that obscured billions of dollars in debts and losses. The United States Government accused Andersen of impeding a Securities and Exchange Commission (SEC) inquiry into Enron's finances.
Andersen is the first big accounting firm ever convicted of a felony. It now faces up to five years probation and a fine of up to $500,000 (it will be sentenced on October 11). SEC rules bar any firm convicted of a felony from auditing publicly traded companies, and Andersen has announced it will stop auditing public companies from August 31. For the Australian accounting profession, the guilty verdict will increase the pressure to ensure audit independence and clean up accounting practices. The Howard Government is still sitting on the report on audit independence compiled by Melbourne University's Professor Ian Ramsay, waiting for the HIH Insurance royal commission to end before it decides what to do about the issue. With the royal commission not due to report its findings until February next year, the Andersen verdict might encourage the Government to move earlier. Publicly, former partners of Andersen Australia are saying they are surprised by the verdict, which will accelerate the civil lawsuits against the firm. Privately, they are extremely worried about the lawsuits and the potential for huge judgments against their former firm. Ernst & Young Australia executives say that as part of the local merger agreement, their firm is protected from any damages awarded to former Andersen clients or their shareholders. Henry Marconi PRAVDA.Ru Sydney
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