Arthur Andersen axes 7,000 jobs

Arthur Andersen LLP will lay off about 7,000 employees, or just over a quarter of its workforce of 26,000, as the company continues struggling to survive its role in the Enron Corp. scandal.

The future of the accounting firm matters to senior executives and IT managers in part because Arthur Andersen also provides IT consulting services. Most of the jobs will be cut in Arthur Andersen's audit and administrative units, the company announced Monday in a statement.

The statement didn't say how the layoffs would affect the firm's IT consulting practice, and calls seeking comment on this issue weren't immediately returned. The jobs will be eliminated over the next several months, the company said in the statement.

Arthur Andersen's top management has indicated repeatedly in recent weeks that it intends to restructure the company as mandated by the Independent Oversight Board (IOB) it created in February. Those mandates include the separation of Arthur Andersen's consulting business, including most of its IT services, from its core audit business.

The IOB stated in its first report in March that Arthur Andersen should get rid of its consulting practices to avoid conflicts of interest and protect the independence of its audit work. This independence is compromised when accounting firms such as Arthur Andersen also sell consulting services to clients they audit, the IOB said. Arthur Andersen has yet to say how it will separate its consulting business or what will happen with its IT services unit.

Arthur Andersen provided both audit and consulting services to energy trader Enron, whose accounting practices are at the center of its bankruptcy scandal. As a result of its role in the debacle, Arthur Andersen has been pelted with civil lawsuits, dumped by some of its biggest clients, hit with an ongoing U.S. Securities and Exchange Commission (SEC) investigation and indicted on an obstruction-of-justice charge by a U.S. federal grand jury.

Chicago-based Arthur Andersen LLP is the U.S. member firm of Switzerland-based Andersen Worldwide SC, which coordinates Arthur Andersen member firms worldwide. Andersen firms employed a total of about 85,000 people worldwide before Monday's announcement.

Also as a result of the Enron mess, Andersen Worldwide's chief executive officer, Joe Berardino, resigned in late March. Efforts by Andersen Worldwide firms and by Arthur Andersen LLP to survive by selling themselves in whole or in parts to competitors haven't been very successful, although efforts along these lines continue.

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