Blue Chip Clients Ditching Andersen

Newsday ^ | March 7, 2002 | DAVE CARPENTER -- AP Business Writer

[Willie Green]

CHICAGO -- Blue-chip corporations have joined the increasing exodus of clients from Arthur Andersen LLP, including Delta Air Lines on Thursday, intensifying questions about whether the accounting giant can survive the Enron scandal.

Delta's firing of Andersen as its auditor after 53 years came a day after Freddie Mac took the same action. Including recent defections by Merck Inc. and SunTrust Banks, Andersen is known to have lost about three dozen public companies as auditing clients this year.

[Willie Green]

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[WIMom]

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[Mr. Lucky]

The free market is a demanding mistress ain't she.

[Willie Green]

The free market is a demanding mistress ain't she.

So is the prospect of federal indictments.

[ken5050]

They can't merge until the liabilities are settled..no one would take that on...so therefore, AA is toast.....

[KC_Conspirator]

University of Toronto accounting professor Ramy Elitzur said Andersen is being treated as the industry's pariah despite its stellar past reputation and the fact that other top firms also have been involved in cases of negligence.

Thats a joke. Its taken my company years to get rid of those Andersen warts. Their reputation has been tarnished in recent years as Andersen has lost some high profile lawsuits. Most of these are regarding the failure to deliver what was promised because they sell people on the notion that their work will be done by experienced consultants when in fact its just overworked novices out of college who don't know a damn thing. Furthermore, Andersen has become famous for the "Neverending Project" which of course is accompanied by overcharging and neverending fees.

[pt17]

Thats a joke. Its taken my company years to get rid of those Andersen warts

You're not wrong. I've run across some very arrogant toadies from AA. One of my customers said retaining them was like buying high priced junk.

[Roger_W_Isom]

Given AA STERLING(??????) record with such "LUMINARIES" as ENRON, GLOBAL CROSSING, HIH of Australia. If I were a shareholder in EITHER MERCK, DELTA, FREDDIE MAC... i'd be getting my money out of those companies POST HASTE now!!!! Let me GUESS which CO. Have been PRACTICING PRO FORMA ACCCOUNTING!!!!:-)))))Perhaps its time we start a DEATH WATCH LIST ON THESE COMPANIES GIVEN TIES TO AA????

[Roger_W_Isom]

Perhaps an SEC audit of SUN TRUST BANKS ARE IN ORDER?????

[Roger_W_Isom]

With defections like THESE AA COULD EASILY be toast as early as Mid April!!!!!! HOw'd YOU like to have your books "AUDITTED" by these CLOWNS???????

[Willie Green]

Thats a joke. Its taken my company years to get rid of those Andersen warts.

I don't want to get into naming names, but years ago I worked as an Industrial Engineer for a well known company that had Arthur Anderson as the auditor.

The plant controller was an arrogant, ambitious Klintonic type that sabotaged production by vetoing requisitions for supplies, spare parts, repairs, etc. and placing all the blame on the engineers. A major brou-haha erupted when I pointed out in a quarterly operations review meeting that he'd been burying the resultant variance under a phony direct material component in our product's Bill of Material. (The impact was about $3½ million on $100 million sales volume!) Shoulda been picked up by Arthur Anderson when auditing our inventory every year.

The situation was rectified and the controller got canned. Unfortunately, I was labeled as a "whistle-blower" and "not a team player" by other scalawags in management. Screw 'em. The CEO appreciated my efforts on behalf of the stockholders (his family controlled about 30%). I've had a fairly thick skin ever since.

[Southack]

"University of Toronto accounting professor Ramy Elitzur said Andersen is being treated as the industry's pariah despite its stellar past reputation and the fact that other top firms also have been involved in cases of negligence."

Andersen has had a sleazy reputation for over a decade, with clients such as Waste Management Executives going to jail and Andersen paying huge fines for signing off on proven, documented FRAUD. Then Andersen got busted at SunBeam. Then Andersen got busted at Global Crossing, Enron, O'Neil Steel, etc.

And there's more to this story than merely losing a few clients...

Here in Alabama, SouthTrust Bank is hammering the heck out of Andersen. Either Andersen cuts its rates in HALF, or else they lose SouthTrust. Wallace Malone is famous for using leverage to squeeze out better pricing, and in this case he knows that Andersen has to play ball.

Now, if some small regional Alabama bank is busting Andersen's chops over their rates, rest assured that many of the other clients who are keeping Andersen on board as their auditor are doing likewise.

So Andersen isn't just losing clients and marketshare, it's also losing its profit margin on its remaining clients (at least those clients with enough business sense to know when to cut a better deal on pricing).

But that part of the story hasn't been covered in the article above...

[Dog Gone]

Andersen never had a good reputation with me. Their projects always exceeded budget and they were always trying to sell us something. Their rank and file accountants were probably fine, but the snake oil salesmen were running amok.

[Southack]

"Andersen never had a good reputation with me. Their projects always exceeded budget and they were always trying to sell us something."

At one of my clients, Andersen came in to one of my projects (this was the Andersen Consulting side, not the accounting side) and immediately put some of their programmers (I use the term loosely, they were college kids with Liberal Arts degrees who'd never coded professionally in their lives before this point) working on a software bug tracking system, unbeknownest to me.

As I made my rounds through the project, I asked them to show me what Andersen had told them to be working on that was so important that they could avoid the programming assignments that I had given them.

They proudly showed off their software-bug-tracker program.

I asked them if they had slept through their briefing a month before because we already had a bug tracker program. Not only did we already have it, have everyone trained on it (except the new Andersen flunkies), and have years of software bug logs managed by the program, but the program that we were using was superior to what these kids wrote (and it only cost $50 per copy because it was off the shelf).

Then I found out that Andersen Consulting had billed my client for the time of all of those new Andersen programmers to write that bug-tracking software. Worse, Andersen called in my client, said that we were now over-budget (but didn't admit why), and then insisted that my group use their new program because of their time/money investment in it!

Years of software bug logs, including the current bugs in the soon-to-be-released version of our software, was lost because the Andersen kids couldn't transfer the data from one system to the other and Andersen's politics prvented us from using the old system.

It was a true disservice to my client. Hey, my firm got paid for all of our employees' time on that project, but the quality of the final output was reduced because we lost the ability to track legacy/recurring software bugs (because the data was politically off-limits).

Eventually the bug-tracking software from Andersen died its own cruel death after irreversibly corrupting its own data and refusing to run to anymore. So back to the off-the-shelf software bug-tracker we went.

The only silver lining in that particular Andersen rain cloud (and I've got many from various past and current clients) was that the new Andersen programmers were kept away from coding on our development project while they were busy playing with their bug-tracker software.

Of course, each of those kids was getting billed to my client at $180 per hour by Andersen for said playtime...

[Dog Gone]

I wish I could say I was surprised. At one point, a company I was working for hired AA to update its basic accounting system. The contract was for something awesome, around $80 million dollars.

Four years later, the cost had reached over $140 million, and they still weren't done. We pulled the plug on them and said it WAS done. Of course it didn't work right, which cost us probably another $100 million in related expenses.

Unbelievable.

[Donald Stone]

Arthur Andersen will continue to do extensive work for the U.S. Government.

[Tuco-bad]

So Andersen isn't just losing clients and marketshare, it's also losing its profit margin on its remaining clients

What's the under/over for how many months before Andersen goes under?

I would set the line at 12 months from now.

Good riddance to them.

[KC_Conspirator]

I understand where alot of the arrogance of big consulting and accounting firms comes from. My company, just like any other, can have areas plagued by bad management decisions, and of course we hire them in to cover for poor hiring and retainment practices.

However, I work in a tech heavy firm and we have tons of temporary projects which consulting firms are made for. But we got in the habit of keeping Andersen around for too long after they had multiple poor performances. Sadly, only a couple of years ago someone got the notion that we should reward good performances and vendors with more work and contracts and not do business with a company just because they have a big name.