If you are a registered user please log in to see more postings.

The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis.

Jan 29

Written by: Jack Ciesielski
1/29/2007 7:32 AM 

From a former Arthur Andersen employee, regarding my post on the Bloomberg/Schumer report:

I feel compelled to respond to your comment about Arthur Andersen: “remember the shredding of evidential workpapers?”

No audit workpapers were shredded, and the DOJ never claimed that workpapers were shredded. The shredded documents were correspondence files and such; documents that did not belong in the workpapers and were never part of the workpapers. The audit workpapers were intact.

As to your comment about flawed audits, that is subjective (the nature of documents is objective). I would only observe that the record of the numerous investigations over the past five years reveals a pattern of deliberate withholding of key transaction details from the auditors, aided and abetted—knowingly—by a host of blue-chip commercial and investment banks.

Thanks for the clarification: I changed the post to read "remember the shredding of correspondence files?"

Aside from that - there's nothing else to change. My point is not to trash Andersen, or its people - my point is that history should not be revised to read that Andersen was done in by litigation. It wasn't.

As for "flawed audits" being a "subjective comment" - no. The outcome of the audit in question is not subjective - it's an objective fact, as well as other Andersen audits of the time. Good audits don't have those outcomes. My point was - and is - that there was more at work in the demise of Andersen than litigation - it started with the audits they could have done better.

That post did not start as an attack on Arthur Andersen, and this one is not going to turn into one, either. But you also cannot say that this was a firm doing everything right and was unraveled by litigation.