Top accountant fined $7m

One of the world's top five accountants has been fined for allegedly fiddling the books of a US firm.

Arthur Andersen has agreed to pay $7m to settle federal charges, in the largest-ever civil penalty against a Big five accounting firm.

Arthur Andersen failed to stand up to company management and betrayed their allegiance to the investing public

Richard Walker
US Watchdog

The US Securities and Exchange Commission alleged that the accountants had filed false and misleading audits of the US firm Waste Management, North America's biggest rubbish-hauler.

Without admitting or denying the allegations, Arthur Andersen has also agreed to an injunction that means it will face stiffer sanctions for future violations.

This is the SEC's first fraud case against a big five accounting firm.

Bad for PR

The firm is hoping that the payout will finally sweep the embarrassing episode under the carpet.

"This settlement allows the firm and its partners to close a very difficult chapter and move on," said the accountants in a statement.

"The allegations underlying the settlement are limited to one client and reflect work that is in some cases more than seven years old," it added.

The four audit partners involved are barred from doing accounting work for public companies between one to five years.

Investor protection

Arthur Andersen was in charge of Waste Management's books from 1992 to 1996 and issued audit reports that are alleged to have overstated revenue by more than $1bn.

Publicly traded companies are required to hire an accounting firm to go through their books using accepted accounting principles.

This ensures that potential investors are not misled by false accounts when considering whether to buy stocks and shares.

The SEC said that Arthur Andersen and its partners had betrayed their allegiance to shareholders and the general public.

"We will not shy away from pursuing accounting firms when they fail to live up to their responsibilities to ensure the integrity of the financial reporting process," warned Richard Walker, head of the SEC.