Ethics Newsline®

CHICAGO
The possible collapse of Arthur Andersen, the accounting firm tainted by the Enron scandal, could spell disaster for some of the firm’s 2,300 clients, which could be forced to find new auditors en masse — a market flood the industry likely could not absorb, analysts warned last week.

But the scramble could also lead to higher standards among the remaining accounting firms, said Paul Brown, chairman of the accounting department at the Stern School of Business at New York University.

“It could be that these other firms are going to be so squeaky clean, so vigilant,” Brown told the New York Times. “That would be the best thing to happen out of all this.”

Andersen has been badly bruised over its handling of Enron, whose books received the stamp of approval from Andersen for years before Enron finally imploded.

After accounting irregularities contributed to Enron’s collapse, Andersen began taking heat for complicity, leading to last week’s federal charges of obstruction of justice, according to the Times.

As Andersen struggles to settle lawsuits arising from its handling of Enron, the firm is also fending off bankruptcy concerns while trying to woo possible merger partners. So far, the firm has had few suitors.