I keep on hearing, "If it weren't for the fact that Andersen was caught shredding, it wouldn't have the problems that they have today." The statement is usually tied closely with a comment that the indictment of the entire firm by the U.S. Department of Justice is "overreaching by an overzealous prosecutor." The argument is also made that a few rogue accountants in Houston were operating by themselves. Then, you have Paul Volker charging in and saying let's settle everything quickly and just allow Andersen to become a "pure auditing firm."

All that seems like a lot of wishful thinking to me and a little too simplistic. I believe that will become even more obvious by a thorough study of Andersen's downfall.

To begin with, pieces of Andersen are being offered for sale with competing bids and the layoffs are starting in earnest as Andersen is letting go of 27 percent of its U.S. workforce--approximately 7,000 employees. Equally important, former Andersen partner David Duncan pleaded guilty to directing the shredding of documents despite knowledge that the SEC was investigating Enron. He is now cooperating with the government's investigation.

To be sure, he won't be the only one. There are many unhappy current and soon to be former Andersen partners and staff. Couple that with the civil suits, criminal indictment, as well as possible additional criminal prosecutions, and I expect a lot of the internal operations of Andersen will be disclosed. The expressed importance of keeping Enron as a client, the prior audit failures, Andersen's record retention policy, the internal alarms raised by Andersen employees, and communications with the home office in Chicago, are just few of the expected tidbits.

What is so unique is that a Big Five's inner workings will be on full display. Never before has the demise of an accounting firm been so publicly shown. It will be quite interesting to see just how other accounting firms are impacted beginning with the close scrutiny they probably will receive.


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