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More thoughts on the resurrected Andersen brand. Part 3

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Here are a few more articles discussing the acquisition of the Andersen brand name by a tax-only accounting firm. My previous articles here and here.

9/8 – re:The Auditors – More on My Reuters Breakingviews Column: The Andersen Tax Name Grab – Francine McKenna brings in more background and other articles on the return of the Andersen brand.

She even quotes the last part of my previous post which said that if a small portion of the worldwide CFOs think the Andersen name denotes quality then there is huge market for the formerly named WTAS firm.

She goes into lots of detail on the cloud over the Big 6 because of their involvement with tax shelters. KPMG settled the case after what Ms. McKenna characterizes as a near-death experience. She says all the big firms were involved.

The article includes some pages from a book which mentions that in 2002 the IRS issued 19 summonses to AA for around 50 different investors.

A Senate committee report specifically mentions KPMG, AA, EY, and BDO as working with one law firm that was particularly prolific at issuing tax opinions of concern to the committee.

With regards to WTAS, the IRS followed the tax issues from Andersen to some of the partners at WTAS since those partners were involved while they were at AA and also apparently had involvement while at WTAS. See the appellate court ruling if you want more details.

The point of that long tangential discussion by her and my mentioning it here is to explain that Arthur Andersen was involved in the tax mess a while back. Many people don’t know about. According to her article, many of the former partners aren’t aware.

Another great article…

9/5 – Thoughts from the Front – Andersen. What a broken brand looks like – Long discussion on bringing back the Andersen brand. The author, Andrew Baker, worked on the 2000 rebranding that birthed the orange ball.

Worthwhile read for accountants, since I think few of us understand this brand stuff. One of several learning points for me is that a brand is a contract between a company and its customers & potential customers. If the contract, in other words the trust behind it, is broken, it will take a lot of time to rebuild.

I wonder how that concept works if most people in the contract think the brand is broken but a significant portion do not.

In terms of whether the Andersen brand is broken, consider this paragraph:

Let’s not regurgitate the well-known facts. Enron. Worldcom. Baptist Foundation of Arizona. Waste Management. Sunbeam. Burp. Feeling much better, thank you.

(Wish I could write that well and wish I had the insight to link each of the accounting fiascos to an article describing the disaster.)

Mr. Baker says the brand is not irrecoverably damaged but it is definitely broken.

He suggests it will take a lot more effort to repair the brand than the partners of Andersen Tax expect. The question is whether it would have been easier and faster to develop a new brand instead of repair a broken one.

Interesting comments on the attitude of former CEO of AA when the DoJ decided to drop the indictment hammer. He is now on the lecture circuit. Talking about ethics.

Mr. Baker points us to a superb background article…

6/7/02 – Wall Street Journal – Arthur Andersen’s Fall From Grace Is a Sad Tale of Greed and Miscues – Article is fairly long but gives superb summary of the downward slide of Arthur Andersen.

In my series of posts on the Olympus fraud, I explained the accepted practice in Japan of tobashi, which means to send something flying away. In the context of corporate accounting, that means to make an accounting problem disappear. Make it go away.

That is a good description of the Olympus fraud and coverup: senior leadership engineered massively complex transactions to make large losses just … fly away.

The WSJ article describes that in 1914 Mr. Andersen said ‘no’ to a railroad client that wanted to cook the books. The motto of the firm was “Think straight, talk straight.”

The article describes a long transition.

By the time of Waste Management, Andersen partners would help the company’s leadership figure out a way to clear out a fraud. It was neither disclosed nor was the board informed. The agreement was to move the fraud back into earnings with a ten-year amortization term. I mentioned this in my post, What firm failed to find these fraudulent fiascos?

From

to

  • creating the American version of tobashi as a value-added service.

Yes, the Andersen brand is seriously broken.

On the other hand

9/2 – Chicago Tribune – After Enron, firm taking back Andersen name – Interesting tidbit is the research conducted by WTAS indicates that only three of the Big 4 have a better name reputation than Andersen.

From the context of that specific paragraph, I’m guessing that would include the second tier firms as well.

Doesn’t really matter what I think does it?

That amount of reputation is definitely something to work with. Especially since the firm has trademark issues of the WTAS name in regards to a firm named WTS in Germany.

The article cites Mark Vorsatz, CEO of WTAS as saying this is a risky move.

Is this risky? You bet.

Is it worth the risk? Probably so.

If enough people disagree with the idea that the Andersen name is irreparably broken and if the reputation is actually as high as the surveys suggest, then the newly rebranded firm can easily sell a tremendous amount of new work and keep their current clients.

My guess? It is an acceptable risk that will pay off well.

Written by Jim Ulvog

September 9, 2014, 9:17 am at 9:17 am

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