KPMG, Andersen In Talks To Merge Operations Outside United States

KPMG Andersen Worldwide

Specifically, the two accounting/consulting giants are working together to consider possible ways in which to combine operations in major markets of Europe, Africa, Middle East, Canada, Asia and Latin America, the companies said.

"Such a combination would be complementary in terms of geographic coverage and industry expertise," said Mike Rake, chairman of KPMG's EMA Region, in a statement.

Meanwhile, the Chicago-based U.S. operations of Arthur Andersen LLP will remain part of the Andersen Worldwide network at least "until Oct. 1, 2002, or until this transaction is completed," according to a statement.

"As a firm, we are committed to moving forward with reforms that will create higher standards and restore the public's faith in Arthur Andersen and the public accounting profession," the statement said.

Andersen's move to merge with one of its fiercest competitors is one of several attempts aimed at saving the besieged accounting/consulting giant, following criminal charges leveled against the company. The U.S. Department of Justice charged Andersen with obstruction of justice related to the destruction of "tons of paper documents and other electronic information" related to inquiries about the collapse of its client, Enron.

Former Federal Reserve chairman Paul Volcker told CNBC the indictment "raises viability doubts and may mean there is no need for an oversight board." Volcker has been serving as chairman of an independent oversight board charged with reforming Andersen's embattled auditing practice.

Andersen acknowledges the destruction of documents, but disputes vehemently that it occurred with the knowledge, much less the consent of, senior management, and said it is "beyond comprehension" for the Justice Department to indict the entire firm.

Speculation swirled last week following the indictment and collapse of merger talks with other former Big Five accounting/consulting companies last week that Andersen would be left with no choice but to file for bankruptcy.

Deloitte Touche Tohmatsu and Ernst and Young called off merger talks with Andersen mid-week, both citing Andersen's "unresolved litigation and legal issues." There was also speculation that Pricewaterhouse Coopers may be willing to merge with Andersen.