The struggling firm is desperately trying to get criminal charges against it dropped. If it can manage this, the US practice could well survive – there are plenty of domestic companies who can do without Andersen’s disappearing international network. If the criminal proceedings continue, however, retaining customers could prove near impossible.
Andersen US is planning to ax 6000 jobs and separate its auditing and consulting businesses.
According to press reports, struggling accountancy firm Andersen is planning to ax 6000 US jobs, representing over 20% of its 28,000 US employees.
Following Tuesday’s resignation of Andersen Worldwide CEO Joe Berardino, the US unit is also planning to announce separation plans for its auditing business and its consultancy arm, in the hope of persuading the government to drop criminal charges relating to the Enron affair.
The move is certainly necessary – but will it be enough? Andersen’s worldwide network is crumbling, as partner firms outside the US join up with rival Big Five accountants. Many of the local practices are seeking a merger with KPMG, although the plans for a worldwide deal failed when the depth of the US unit’s problems became clear.
While an international network is certainly a useful asset in an auditing firm, it is not essential. A multinational such as Shell needs a multinational auditor. A firm such as Waste Management, which hardly trades outside US home base, does not. At present, despite high profile defections, Andersen still has nearly 80% of its US clients.
Persuading these domestic companies to stay, however, is not guaranteed. As it happens, Waste Management has dropped Andersen – for credibility reasons. The company is a special case – it once had to make the largest earnings restatement ever, and management is understandably sensitive about being seen to do the right thing.
Most of Andersen’s audit clients are not in this position. The vital point in retaining them will be to persuade the government to drop criminal charges. Since the charges (at a corporate level at least) are somewhat tenuous, this should not be impossible. Of course, whether Andersen can actually make it happen in such a highly politicized case is another question.