Former Federal Reserve chairman Paul Volcker, hired to lead an oversight board to overhaul business practices at Arthur Andersen LLP, said his group will continue to press for accounting industry reform whether Andersen survives or not.
Volcker, speaking on Bloomberg Radio this afternoon, said that the panel has decided to "keep together so that we can keep our views on the reform of the profession alive."
Andersen, Enron Corp's auditor for more than a decade, is struggling to survive after being indicted by the Justice Department on charges of destroying documents and obstructing the government's investigation into the energy trader's collapse.
Volcker said he hopes Andersen survives so that it can serve as an example to the accounting industry that a firm devoted exclusively to auditing can prosper. The former Fed chairman has suggested that the other four major accounting firms would prefer to see Andersen fail rather than adopt the changes his group has recommended.
"These firms have become financial conglomerates," Volcker said. ``Auditing is in danger of becoming the tail on the dog rather than the dog. I don't think that's right in terms of the vital public purpose that an auditing firm has. They are the last line of defense to make sure financial reporting is accurate.'' Andersen is in talks to sell all or part of the firm to rival KPMG LLP, the third biggest accounting firm, as clients continued to flee, people familiar with the situation said. Abbott Laboratories and Sara Lee Corp. both dropped the Chicago-based firm as auditor, bringing its client losses for the year to more than 40.
Volcker's board -- which includes Charles Bowsher, current head of the accounting industry's Public Oversight Board and Roy Vagelos, former Chairman of Merck & Co -- has demanded Andersen split its accounting from its consulting business and initiate more than a dozen reforms to make senior managers more accountable.
The board has seven-member advisory panel which includes John Bogle, founder of Vanguard Group, Ned Regan, former comptroller for New York State, and Michael Sutton, a former chief accountant at the Securities and Exchange Commission.
The increase in revenue from consulting work has put pressure on accounting firms' audit partners to "go around the edges of the envelope and make things look a little better than they really are," Volcker said.
Volcker's recommendations, which Andersen has pledged to implement, would end all revenue and profit-sharing and cross-subsidies between auditing and consulting partners.
Volcker said yesterday morning he hadn't talked to Andersen senior management since the indictment was announced Thursday.
The charges make the outlook for the firm "much, much more difficult," Volcker said. "The future of Andersen is in very great jeopardy."
NO RECIPROCITY: Taipei has called for cross-strait group travel to resume fully, but Beijing is only allowing people from its Fujian Province to travel to Matsu, the MAC said The Mainland Affairs Council (MAC) yesterday criticized an announcement by the Chinese Ministry of Culture and Tourism that it would lift a travel ban to Taiwan only for residents of China’s Fujian Province, saying that the policy does not meet the principles of reciprocity and openness. Chinese Deputy Minister of Culture and Tourism Rao Quan (饒權) yesterday morning told a delegation of Chinese Nationalist Party (KMT) lawmakers in a meeting in Beijing that the ministry would first allow Fujian residents to visit Lienchiang County (Matsu), adding that they would be able to travel to Taiwan proper directly once express ferry
FAST RELEASE: The council lauded the developer for completing model testing in only four days and releasing a commercial version for use by academia and industry The National Science and Technology Council (NSTC) yesterday released the latest artificial intelligence (AI) language model in traditional Chinese embedded with Taiwanese cultural values. The council launched the Trustworthy AI Dialogue Engine (TAIDE) program in April last year to develop and train traditional Chinese-language models based on LLaMA, the open-source AI language model released by Meta. The program aims to tackle the information bias that is often present in international large-scale language models and take Taiwanese culture and values into consideration, it said. Llama 3-TAIDE-LX-8B-Chat-Alpha1, released yesterday, is the latest large language model in traditional Chinese. It was trained based on Meta’s Llama-3-8B
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has