Duncan, who once supervised Andersen's Enron audits, was a government witness against his former employer, which is facing a federal obstruction of justice charge for shredding Enron documents. He pleaded guilty to the same charge April 9.

With three charts, Duncan explained the organizational structure of Andersen, once the fourth-largest accounting firm in the nation, and then began detailing its accounting work for Enron, which filed for Chapter 11 protection last December in the nation's largest bankruptcy.

In the fall of 2001, Duncan said there were discussions within Andersen about whether to report hedging transactions, called Raptors, separately or as one group. Enron would benefit from treating them as one unit because it would reduce their losses, he testified.

Duncan said it was very important to try to decide the issue before that quarter ended because it could create the third straight quarter of Enron accounting errors. "It would raise the scrutiny of review by outsiders," he said.

Prosecutors are trying to show that going into the fall of 2001 Andersen officials felt like they were on probation because of recent problems the SEC had uncovered with their audits of Waste Management, Inc., and Sunbeam.

Andersen agreed in June 2001 to pay a $7 million fine to the SEC for overstating the financial health of Waste Management, although not admitting any wrongdoing. In May of the same year, the firm agreed to pay more than $110 million to settle a suit for allegedly allowing Sunbeam to file false financial reports.

Duncan, the government's star witness, took the witness stand late Monday for the first time as the trial began its second week. He admitted as he did April 9 at his arraignment that he had obstructed justice by ordering shedding of documents.

"I obstructed justice," he said. "I instructed people on the team to follow the document-retention policy, which I knew would result in the destruction of documents."

Prosecutors allege Andersen began shredding "tons" of Enron documents Oct. 23 of last year when it was informed that the SEC was beginning an investigation of the energy company's accounting practices.

If convicted, Andersen could be fined up to $500,000 or put on probation, which could mean restitution, a moratorium on certain types of business or other restrictions.

Since the Enron bankruptcy last December, Andersen has lost more than 200 clients and laid off 7,000 of its 26,000 employees.