Costco shareholders likely will raise the issue tonight at the company's annual shareholders meeting in San Francisco. Since 1984, Arthur Andersen, has been the independent auditor for Issaquah-based Costco Wholesale.

"I'm sure we will have questions about it," said Costco President James Sinegal, who has received about eight letters from shareholders regarding Andersen.

"We are sticking with them," he said.

Andersen is the fifth-largest accounting firm, with 85,000 employees and 100,000 clients worldwide.

Costco is just one of many Washington companies that use the services of Arthur Andersen. Weyerhaeuser Co. and Alaska Airlines are other longtime clients. Avenue A and others are among the newer companies to employ them.

Andersen Chief Executive Joseph Berardino said Monday that the accounting firm has lost business because of the Enron bankruptcy and scandal surrounding the company's audit of the Houston firm.

Delta Air Lines said yesterday that it is considering replacing Arthur Andersen as its auditor. Delta would be the first major client to take its business elsewhere.

"People who know us well continue to hire us and stand by us," Berardino told a news conference at Andersen's main offices in Chicago this week "Those who don't know us well are less anxious, frankly, to hire us."

It's unlikely that Andersen's alleged actions in connection with Enron would be repeated at Costco, but company analysts and observers say the issue could be raised at the annual meeting.

Sinegal said that more than 75 percent of Costco's stock is held by institutions.

"They understand the Enron situation was far outside the purview of the Arthur Andersen office in Seattle," Sinegal said.

"They have been our auditors for 18 years. We have a good relationship and have the highest respect for the office we deal with -- the Seattle office -- on a professional and ethical basis. Unless something comes out that suggests there is a problem that is endemic throughout their organization, we plan to stick with them."

Costco, with an executive team that prides itself on openness, right down to answering their own phones rather than referring calls to a public-relations team, is a world apart from troubled Enron.

Costco, which operates huge warehouse-style discount retail stores worldwide, is the solid sort of company investors like to grab and hold onto in turbulent times, analysts say.

When Sinegal meets with shareholders tonight, he will describe the company's growth during an economically difficult year.

Costco posted record annual sales of $34 billion for fiscal 2001, which ended Sept. 2. That was up 8 percent from fiscal 2000. The company opened 39 new stores for a total of nearly 300 warehouses in the United states and about 400 worldwide.

The company spent $1.5 billion building new facilities and $150 million remodeling older units. The expenses took a toll on the company's operating budget. Earnings for the year were 5 percent below earnings a year earlier.

The membership renewal rate was 86 percent, the biggest in company history. In the last year, Costco shares have ranged from a high of $46.25 last January to a low of $31.22 in September. The price per share slipped 43 cents yesterday to $43.57.

Costco usually holds its annual meeting in Seattle, but occasionally schedules the gathering in California because of the large number of shareholders in that state.

In a statement Monday from its Chicago headquarters, Andersen sought to separate the Enron incident from its other offices and employees. "People in our firm made serious errors in judgment in destroying documents," according to the statement.

"What was done was not in keeping with the values and heritage of this firm. It was wrong. There's no other word for it. But 85,000 people did not work on the Enron engagement; 85,000 people did not destroy documents. And 85,000 people did not encourage anyone to destroy those documents.

"This firm did not develop its reputation for integrity overnight," the statement continued. "It earned it by doing the right thing 365 days a year over 90 years -- one honest professional at a time."

Despite a solid financial year for Costco and shareholder loyalty, the auditor question is bound to come up tonight.

"I can see where the question might be raised. We are in an environment where individual investors are feeling vulnerable," said Teresa Meyer, an analyst with D.A. Davidson. "I don't think it is necessarily going to happen. There are no issues related to Costco's financials that would raise a flag. It looks like everything is clearly disclosed."

But such questions are the grist of shareholder meetings. Each year Nordstrom executives are called on to explain their positions on fur and sweatshop labor. Starbucks is asked about using hormone-free milk in its stores.

Laurie Breidenbach with Ragen MacKenzie in Seattle said the auditor question likely will be raised, but has little significance in connection to Costco.

"Costco is a very solid operation," Breidenbach said. "There is no complex organizational structure to hide things behind."

"I don't think what is going on at Enron is reflective of Arthur Andersen professional standards," she said. "I don't expect there will be an exodus of clients from Andersen."

-- By Kathy Mulady