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Just a small portion of people who don’t think the Andersen name is mud means there is a huge potential market. Part 2

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Previous post started a discussion that the tax-only accounting firm of Wealth & Tax Advisory Services, or WTAS, has acquired the right to use the name Andersen. The firm will change its name to Andersen Tax.

More discussion this week

Prof Schaub rolled his ideas into a full article – 9/4 – LinkedIn – No Surprise to See Andersen Resurrected With time, people forget. His students this fall were 9 with Arthur Andersen imploded.

In response to the “just a few bad apples” idea, look at all that has escaped from our collective memory:

The firm had a long string of audit failures: Baptist Foundation of Arizona, Sunbeam, Waste Management, WorldCom. If Enron had not brought them down, WorldCom likely would have, despite the Supreme Court eventually overturning the firm’s conviction.

(To fill out the list, let’s remember Boston Chicken and Global Crossing. Keep in mind that in the Waste Management fiasco, the AA partners helped management figure out a way to back out of the fraud, to sort through what journal entries would unwind the mess.)

The sad part is that the long-departed legacy of the original Arthur was of quality work and a high level of ethics. I remember hearing of that way back in time when I started at the firm.

The professor wishes the name still had that meaning.

So do I.

9/4 – Breaking Views – Arthur Ashes – Francine McKenna suggests it is revisionist history to focus on values of “quality, stewardship and client service” while forgetting Sunbeam and Waste Management. (I’d throw in Baptist Foundation of America for headliners).

She points out, with a link to an appellate ruling, a case in which partners who formed WTAS were defendants in tax litigation over their involvement with tax shelters they sold while they were at Andersen.

I browsed the opinion but didn’t understand much of it, other than the partners of WTAS went to trial over work they performed while at AA and the IRS appealed the result. If you are a tax whiz who would enjoy an appeal court’s assessment of whether a document is a memorandum or a draft, along with the impact of that conclusion on evaluating a complex tax position, then you will really want to check it out. (I didn’t get beyond page 2.)

Back to the article… KPMG settled similar cases in 2005. That tax issue damaged KPMG’s reputation.  She isn’t aware of any public information for the terms under which WTAS settled.

She suggests that only with

..an echo chamber full of bruised egos..

would a firm using the Andersen name be able to

..reliably promise accountability again.

She thinks this will not end well.

When I grow up, I hope to write as clearly and succinctly as either Ms. McKenna or Professor Schaub. Check out their articles.

On the other hand…

9/3 – Quartz – Why reviving the Arthur Andersen brand isn’t as crazy as it sounds – Jason Karaian says that many people who used to work at Andersen believe the name represents quality.

Worldwide, there were around 85,000 people working at AA when it collapsed. That crowd of people is spread throughout the business world. Large portions of those people are in major decision-making roles a decade later. That’s a huge potential network.

Many people perceive what happened to the firm was an injustice. I’m guessing the folks who believe that way constitute a huge market out there.

My take

People with recollections of the disasters around the turn of the century do not have a high opinion of the name Arthur Andersen.

Not everyone who worked at the firm worked on a failed audit.  The staff who did provide quality service at the firm, who then became involuntary alumnus, probably have a high opinion of the name. I’ll guess a lot of the former staff believe the indictment was a travesty.

Seems to me that is the target market of the new firm.

So what if 60% of people today and a far higher percent of accountants think the name Andersen is mud?

That still leaves a huge number of people who like the name, and they are in positions to decide what firm to hire for tax work.

Partners in the WTAS firm probably don’t care one bit that Mike Shaub, Francine McKenna, me, and lots of other people, maybe including Barbara Toffler, think poorly of the Andersen name. We aren’t potential clients.

The WTAS firm, now Andersen Tax, reportedly had about $150M of revenue last year. If just 4% or 8% of CFOs around the US and Europe think highly of the Andersen name, that means there is a humongous market for the new firm.

And they just got millions and millions of dollars of free, high visibility advertising this week.

Sounds like a good move for them.

Full disclosure: I worked in the Albuquerque office of Arthur Andersen for a year and a half before moving a few blocks to Peat Marwick. Worked there for 3 years. Filter my comments as you wish.

Written by Jim Ulvog

September 5, 2014, 12:32 pm at 12:32 pm

Posted in Accounting, Audits

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