In a joint statement released in Prague Friday, KPMG Central and Eastern Europe and Andersen Central Europe announced they had "ceased negotiations regarding the proposed combination of their practices in the region."

A similar joint statement was issued Thursday in Budapest announcing the breakdown of talks.

KPMG gave no reason for the failure to reach an agreement, and Andersen officials in Budapest and Prague did not respond to requests for comment. Andersen Central Europe managing partner Paul Antrobus declined comment when reached by telephone.

In Prague, local newspapers reported that Deloitte & Touche was ready to enter negotiations with Arthur Andersen Czech Republic to buy the firm's assets if the talks with KMPG failed.

Andersen Central Europe is engaged in business in Bulgaria, Croatia, the Czech Republic, Hungary, Romania, Slovakia and the Baltic countries of Latvia, Lithuania and Estonia.

On Wednesday, the Polish units of Andersen and rival Ernst & Young announced they had signed a declaration of intent to merge their local offices. Andersen is listed third among the global Big Five in Poland, with annual revenue of about $70 million, compared with about $30 million for Ernst & Young. The company will operate under the Ernst & Young name.

Andersen's Polish unit, which is separate from its Central Europe office, has more autonomy because of its local client base. Its customers are among Poland's biggest companies, including state-owned PKO Bank Polski, energy exchange PSE, railway PKP, insurers PZU SA and Warta SA, oil company PKN Orlen and energy and telecom conglomerate Elektrim SA.

Andersen, which has been indicted in the United States for its role as auditor of failed energy trader Enron Corp., had sought to combine its non-U.S. businesses with KPMG, but the plans fell apart early this month after Andersen's office in Spain broke away to join Deloitte. Since then, Andersen offices around the globe have been going their separate ways.

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