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Tuesday, 19 March, 2002, 23:15 GMT
Questions over Andersen break-up
Former Federal Reserve Chairman Paul Volcker
Volcker: Prefers that Andersen stay one company
Andersen could be fatally crippled if its international partners complete a merger plan with fellow accounting-firm KPMG, according to the man brought on board to repair the company's reputation.

"I cannot oversee an Anderson that doesn't exist," former Federal Reserve Chairman Paul Volcker told BBC News.

The esteemed financial guru was brought on board in late February in move to restore respectability to the embattled firm.

Andersen, he world's fifth-largest accounting firm, has been hit with a wave of accounting scandals, including those at energy-trader Enron and communications firm Global Crossing.

Mr Volcker said that he is "not out of a job", in the sense that his primary interest is with reform of the industry and the accounting profession.

I would certainly prefer that the company stay... so they can become a first-class auditing company

Paul Volcker, former Fed chief
"That's not going to stop whatever happens to Andersen," he said.

Mr Volcker said he believes Andersen can exist without its international branches but that "it is more difficult without question".

Little sway

Mr Volcker, while not angered by the decision by Andersen's non-US partners to split, said he preferred the firm stay as one worldwide company.

"I would certainly prefer that the company stay so they can show that they can become a first-class auditing company - with a priority on the accounting," Mr Volcker told BBC News.

But he feels he has little sway in convincing those partners who wish to split from doing so.

"They are going to do what they is best for them," Mr Volcker said.

Andersen's lapses have produced critical comments from many fronts, and have resulted in an indictment by a federal grand jury on the charge of obstruction of justice in the case of Enron.

For his part, Mr Volcker said those sorts of lapses are rampant throughout the industry.

Conflicting businesses

He said his efforts at repairing and reviving Andersen are part of a larger goal to restore respectability to the accounting profession as a whole.

"My interest in this - in a sense - is not in Andersen," Mr Volcker told BBC News, "it's seeing whether the profession can return to its roots."

Those roots, he believes, are ensuring that companies report properly prepared financial statements.

In recent years, however, accounting firms have been distracted by more lucrative areas such as consulting and tax advising, Mr Volcker said, which many times conflict with firms' auditing duties.

But he also said the blame lies beyond just the auditing firms.

"There are a lot of failures that are revealed here," he said.

Wake-up call

Mr Volcker said US accounting standards are not perfect, even if they are the best in the world.

"The best has been proven to be not good enough," he said.

The country has been shocked psychologically to find the vulnerabilities not only in the standards but also in the enforcement of standards and the feebleness of auditing practices.

"All three areas have had weaknesses," Mr Volcker said, "which is a wake-up call to us."

Former Federal Reserve Chairman Paul Volker
"They face a very daunting challenge"
See also:

19 Mar 02 | Business
Q&A: Andersen offices defect to KPMG
19 Mar 02 | Business
Tough times for the 'Androids'
15 Mar 02 | Business
US bans Andersen from official work
15 Mar 02 | Business
Andersen UK denies Enron cover-up
02 Mar 02 | Business
Andersen suffers double blow
05 Feb 02 | Business
Audit giants called to account
29 Jan 02 | Business
Andersen on the defensive
19 Mar 02 | Business
Andersen offices to merge with KPMG
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