"There is some comfort in realising that WorldCom's auditor was Andersen and not one of the other four big firms," said Mr Art Bowman, a respected US accountancy commentator.
Andersen, the disgraced and virtually collapsed accountancy firm, had a large auditing presence in energy and telecoms, two areas particularly under scrutiny in the wave of financial reporting scandals.
Among its energy clients were Enron, Dynegy and Halliburton. In telecoms, it looked after WorldCom, Qwest and Global Crossing. All are names that have appeared on the ever-lengthening list of accountancy investigations.
Andersen, which was found guilty of obstruction of justice in a criminal investigation over Enron, is unwinding all its US audit practice, with the result that much of its work, however unfairly, now seems tainted.
If WorldCom's seemingly massive fraud had been audited by one of Andersen's big rivals - PricewaterhouseCoopers, Ernst & Young, KPMG or Deloitte Touche Tohmatsu - it could have cast a shadow over their audit work.
Andersen has portrayed itself as just as much a victim of WorldCom's management as investors.
"Our work for WorldCom complied with SEC [Securities and Exchange Commission\] and professional standards at all times," it said in a statement on Tuesday night. "It is of great concern that important information about line costs was withheld from Andersen auditors by the chief financial officer of WorldCom."
The firm elaborated: "The WorldCom chief financial officer did not tell Andersen about the line cost transfers, nor did he consult with Andersen about the accounting treatment. Upon learning of the transfers, Andersen conferred with the WorldCom audit committee and new management, and advised the company that WorldCom's financial statements for 2001 should not be relied upon."
However, the SEC and other investigators will be looking at the role of the auditor at WorldCom. Analysts say that the sheer scale of the financial mis-statement - almost $4 billion (€4.05 billion) - makes auditor denials difficult, though not impossible, to swallow. Andersen, of course, has almost nothing further to lose.
But individual partners or former partners may face prosecution, civil actions or be named in WorldCom shareholder lawsuits.
Meanwhile, the remaining accountancy firms, whether or not Andersen staff were involved in WorldCom wrongdoing, have to deal with another large blow to their profession's reputation.
Mr Bowman says the firms had internal problems that made audits more likely to be less professional.
- (Financial Times Service)
