Paul A. Volcker Fed Chairman (1979-87)

The Independent Oversight Board will be provided with a professional staff and assured free access to all information relevant to a full review of the policies and procedures of the firm. To assure the quality and credibility of the firm's auditing process, the IOB will have full authority to mandate changes in such practices, as it may find necessary and desirable.

"While the measures taken ... apply to Arthur Andersen LLP, our U.S. firm, the entire Andersen global organization, in cooperation with the Independent Oversight Board, will take the appropriate steps to assure confidence in the quality of our audits in all jurisdictions, taking into account local circumstances and regulations," Berardino said.

Arthur Andersen LLP will no longer accept assignments from publicly traded U.S. audit clients for the design and implementation of financial information systems, and will no longer accept engagements to provide internal audit services to publicly traded U.S. audit clients. The firm will fulfill existing commitments.

Berardino emphasized that these actions are the beginning of a broad re-examination of the firm. "The overriding purpose of these measures -- and those that follow -- will be to provide assurance to clients and the investing public that the firm will be restructured to achieve one essential objective: quality auditing," he said.

Beyond changes within Andersen, Berardino and others have called for modernization of the U.S. financial reporting model, reformation of a patchwork regulatory system, faster standard-setting, swifter profession-wide disciplinary processes and increased accountability for all parties in the capital market system.

In agreeing to lead the IOB, Volcker noted, "Some months ago, in addressing the International Conference of Financial Executives, I stated that my concern was that 'the profession of auditing and accounting is in crisis.' That crisis is now evident to everyone."

See Global Accounting Standards Update for an overview of Volcker's speech at this conference.

Excerpt from contract between Arthur Andersen and Chairman Volcker (Released Feb. 4, 2002): "The Oversight Board shall have the authority to (1) mandate revisions to policies and procedures and/or to implement such additional policies and initiatives as it deems necessary or desirable and (2) advise Arthur Andersen LLP with respect to the assignment and retention of key personnel, and Arthur Andersen LLP agrees to be bound by the determinations of the Oversight Board with respect to all such matters (except to the extent such determinations may cause Arthur Andersen LLP to be in violation of any legal, regulatory or other professional requirements). The Oversight Board shall have full access to all necessary information and full administrative support and shall have the right to hire its own outside staff, counsel and advisors. All decisions concerning the selection of staff, counsel and advisors shall be in the sole discretion of the Oversight Board."

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