What happened to Arthur Andersen?

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: Topping up weeks of obfuscation, Satyam chairman B Ramalinga Raju has admitted to major accounting irregularities, and resigned. Which of the “big four” had valued Maytas Properties, whose proposed acquisition for $1.3b spurred a shareholder rebellion, has still not been made public. But Satyam’s statutory auditor Price Waterhouse, an associate firm of PwC, is under the scanner. A comparison with Arthur Anderson, which lost its spot among the “big five” once the lacunae in its Enron audits were exposed, is definitely called for at this point.

The Enron scandal a) underlines how a nexus between corporations and their accounting firms can turn dark and nasty and b) shows that such a pattern of deception erodes confidence in the (almost sancified) numbers that buttress markets. Public memory being short, all the regulatory frameworks demanded at the time of that scandal sounded freshly scripted in 2008. But back in 2002, when Andersen was convicted of obstructing justice by shredding Enron related documents, there was a great cry for an independent agency with the power to go after both the accounting firms and their clients, and enforce immediate sanctions against auditors that compromised public interest. Had that cry been aptly addressed, it is arguable that say the Madoff scandal could have been averted.