When HIH, at one time Australia’s second largest insurer, collapsed a year ago this month, one of the first questions raised was why its officers and directors, and its auditors, Arthur Andersen, had failed to reveal the company’s parlous economic state and shaky finances earlier. Now, according to a report from Reuters News Agency, an angry group of shareholders is lined up to try to recoup some of their losses from Andersen.
When HIH filed for bankruptcy protection the liquidator, Tony McGrath, a partner at KPMG, another big five accounting firm, estimated the deficit at around $355 million. Last August, with the review of HIH’s finances far from complete, and a Royal Commission in place to investigate the whole matter, he said that they could go as high as $2.8 billion.
The commission has just heard evidence from yet another big five firm, Ernst and Young, which conducted a special assessment of HIH at the request of Westpac Bank, its biggest shareholder, in November 2000. They were unable to give an opinion due to lack of information, but apparently they never reviewed Andersen’s records.
According to Reuters Andersen’s role in the collapse of Enron, which it also audited, has perhaps encouraged HIH’s shareholders to file a claim against the beleaguered accounting firm. They’re apparently waiting until Andersen representatives testify before the Royal Commission next month, and until that body issues its final report on the matter, which isn’t expected until the end of June.
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