Andersen, the accountancy firm whose credibility has been rocked by the Enron scandal, was under the spotlight yesterday for two other instances of possible accounting irregularities involving major clients.
The author of a report by the General Accounting Office, the investigative arm of the US Congress, accused Andersen of failing to meet professional standards in its audit of Nasa, the national space agency, because it overlooked a $644m (£450m) accounting error for the 1999 financial year.
And a letter quoted in the Los Angeles Times showed that a former financial officer for Global Crossing, the telecoms group that filed for bankruptcy protection this week, warned its legal department several months ago of "deceptive accounting practices" that he feared were misrepresenting the company's financial health.
Andersen took issue with both accusations, saying it strongly disagreed with the conclusions of the GAO report and that the former Global financial officer was merely seeking attention by trying to draw parallels with the Enron situation.
Nevertheless, the claims can only bolster speculation that Andersen's credibility and survival is on the line following reports that it stood by inflated financial statements at Enron and shredded hundreds of Enron-related documents once problems started coming to light. Gregory Kutz, who wrote the GAO report on the Nasa episode, told the Houston Chronicle: "Their [Andersen's] work did not meet professional standards. Auditing is really about independently validating the numbers, not just saying, 'management told us, therefore it is so'." He said the $644m oversight appeared to be a straight error, but added that Andersen had been unable to prove it had conducted a proper audit.
The letter from the former General Crossing executive, Roy Olofson, alleged more deliberate forms of improper accounting practices within the company, including inflated revenue and cash-flow figures. The general counsel who received the letter quit his job later – a decision the company insists was unrelated.Reuse content