Two Asian Andersen offices sign with E&Y


Last year's stock slide and security problems drove companies out of the Philippines, but SGV dominates the market

MANILA, Philippines (CNN) -- Two new Asian offices of embattled accounting company Arthur Andersen have left the partnership, opting to merge with Ernst & Young.

In the Philippines, the prominent accounting company SGV & Co. is leaving Andersen Worldwide and has signed to merge with Ernst & Young International.

Meanwhile, Andersen Malaysia has inked a preliminary deal to merge into Ernst & Young.

In a slightly different setup from the Philippines structure, Andersen Malaysia is controlled by Malaysian partners who also own the country's largest local accounting company, Hanafiah Raslan & Mohamad.

SGV dominates market

The Malaysian deal has yet to set terms, which the two sides hope to settle within months. On the Philippines front, where the companies have already signed the contract, the merger will happen "very quickly," according to William Kinsey, Ernst & Young's global chief.

The moves follow a trend in Asia, of country affiliates reaching their own agreements with one of the members of what was the accounting world's "Big Five."

SGV & Co., which does the books for around 40 percent of the country's 1,000 largest companies, took down its signs in March.

Chairman Cesar Purisima says he has been negotiating with many potential partners and settled a deal with Ernst & Young on its own terms, which weren't disclosed.

The company could to some degree set its price, such is its dominance of the market. "It's not 'What are their terms?' It's what are our terms?' " Purisima told the Wall Street Journal.

The company conducted the audit of thousands of pairs of Imelda Marcos' shoes, when the country's former first lady was forced to flee with her husband, the newspaper reports.

Country offices defecting

The greater China office of Arthur Andersen has already merged with rival PricewaterhouseCooper's branch in Hong Kong.

But the Singapore, Australia and New Zealand operations have already agreed to join forces with Ernst & Young (full Australia story).

If those deals are finalized as expected with the Philippines and Malaysia deals, announced Tuesday, it means Ernst & Young will assume the bulk of Andersen's Southeast Asian and Pacific operations.

But Andersen's country offices continue to organize their own terms. The process also still allows for client defections.

In the transition from Arthur Andersen to a new auditor, any company typically still has to sign a new deal with the fresh auditor.

Arthur Andersen LLP, the limited partnership in the United States, appears ready to go to court on May 6 to settle a U.S. Justice Department indictment. The company unraveled after its client, Enron Corp., collapsed.

Joseph Berardino, then Andersen's CEO, warned Asian companies that accounting standards here are lacking, shortly before the collapse of Enron (full story).