SEC Probes Andersen Role in Losses
CHICAGO (AP) _ The Securities and Exchange Commission is investigating Arthur Andersen & Co.’s role in bookkeeping entries that forced Waste Management Inc. to take a $1.18 billion loss last year and restate its earnings back to 1992.
The SEC has been informally examining Waste Management’s records since November, when the giant trash hauler told it that a change in accounting systems would cause the huge loss for 1997 and wipe out $1 billion in profits over the previous five years.
But the formal investigation of Andersen’s role was disclosed only this week in a Waste Management filing with the SEC. The investigation began shortly after Waste Management issued its revised earnings in February, interim Chairman Robert S. Miller said.
``Now that we have (the restated earnings) out and published, we’re turning out attention to the other question, which is, ’Who is responsible for the error, and why were they doing it?‴ Miller said in February. ``I’m sure the SEC is going to want an answer to that question.″
Andersen confirmed the investigation and said it would cooperate with the SEC.
``We normally do not comment on client issues,″ said Matthew P. Gonring, managing partner of communications for the Chicago-based auditing firm. ``However, it is normal in a situation like this for the SEC to look at all facets of the restatement, and it would be routine to ask for auditor and accounting records. ... There has been nothing unusual or unexpected in this process.″
Experts agree that there is nothing unusual in the SEC examining Andersen’s role in generating or approving Waste Management’s financial reports. But the agency does not usually probe the auditors before the client, said Arthur Bowman of the Bowman Accounting Report, an Atlanta-based trade publication.
``Usually, the SEC beats up on the company and then beats up on the accounting firm,″ Bowman said. ``It’s so unusual to me that this is happening in the sequence it is happening.″