The proposed new firm -- which will operate as Arthur Andersen -- will combine each firm's assurance, tax, corporate finance and business consulting practices and professionals. The leadership team, according to a statement issued by Arthur Andersen, will be drawn from both organisations, with the KPMG head of Canada, J Spencer Lanthier, serving as the chairman and chief executive and Arthur Andersen's Russel C Robertson as the managing partner.

Arthur Andersen is a $6.1-billion global firm which isundergoing a protracted legal divorce from its sister firm, Andersen Consulting. Once the divorce is through, Arthur Andersen's position amongst the Big Five is bound to be affected.

As a growth strategy, therefore, Arthur Andersen has been actively building its business by merging and acquiring the rival firms national practices. Under the leadership of its worldwide managing partner, Jim Wadia, the firm has already made successful inroads into the rivals' practices in Chile, Brazil and Germany. Says Wadia, "We expect to continue to attract top-quality firms to our organisation."

According to a senior partner of a rival firm, most firms are today trying to build a global organisation by closely integrating their existing national practices. This is a trend away from the earlier norm where most of the Big Five firms were global networks linking autonomous national firms. Lanthier conceded that since its founding in 1986, KPMG has been structured as a federation of firms rather than a global business.``This made it difficult for the firm to invest in worldwide infrastructure.''

Although KPMG did embark on a global restructuring programme last year, there were concerns about the high cost of reorganisation and the time it will take. By joining Arthur Andersen, according to Lanthier, the practice will benefit in terms of getting ready systems and business practices.