PracticeAuditArthur Andersen faces final censure

Arthur Andersen faces final censure

Audit firm Arthur Andersen to be fined £75,000 on top the £100,00 it has to pay in costs for its audit of condom maker SSL

In what could be the last word on former global audit firm Arthur Andersen,
the profession’s watchdog has fined it £75,000 and ordered it to pay £100,000 in
costs for its work on the audit of condom maker SSL.

A tribunal of the
Accountants Joint
Disciplinary Scheme
found that Andersen had not properly planned the audits
of SSL, makers of Durex, in 1999 and 2000, failing to spot that sales had been
booked into the wrong accounting period.

The 1999 accounts included £17.1m of wrongly booked sales, while 2000 saw
£4.8m of sales that should not have been included.

Andersen was so reluctant to contact customers to verify the sales,
specifically change of ownership of goods from SSL, that the tribunal has called
on standard-setters to act.

‘The failure and apparent reluctance to communicate with the appropriate and
relevant third parties has been a recurrent theme in recent Joint Disciplinary
Scheme cases and we hope that those responsible for current auditing standards
ensure that there is emphasis on the dangers and potential limitations of
reliance, without independent verification on management representations about
matters which are highly material to financial statements,’ the tribunal report
said.

The tribunal said that Andersen attempted no third-party confirmation or
verification of statements from SSL management in 1999 and that in 2000, even
though a risk had been identified, ‘insufficient’ work was undertaken.

Andersen collapsed in 2002 after the Enron scandal. Since then, two partners
have managed the run-off of the business.

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