<p>WASHINGTON-Credit unions need to play by Securities and Exchange Commission (SEC) rules regarding auditing and accounting work performed by Arthur Andersen LLP even though they are not subject to oversight from the agency, NCUA directed. The federal financial institutions regulators, including NCUA, announced that the financial institutions they supervise should follow guidance issued by the SEC regarding auditing and accounting work performed by Arthur Andersen LLP in light of its role in the Enron scandal. The SEC announced on March 14 and 18 that it would continue to accept financial statements audited by Andersen provided the companies filing the statements obtain certain representations from the firm concerning audit quality and controls and generally set forth those representations in their filings. Depository institutions that discontinue business with Andersen may submit their filings by the original due date with unaudited financial statements and file amended papers containing audited financial statements within the SEC's 60-day deadline. "I think it's workable and it makes sense for the agencies to step up," said Laura Pringle of Pringle and Pringle, and a lawyer specializing in regulatory issues, of NCUA's and the other financial regulators' actions. Gene O'Rourke, partner in charge of credit union auditing for McGladrey and Pullen, explained, "The SEC does not have any direct line of authority over the NCUA. However, some regulators will replicate all or part of the SEC's regs." He explained that, although he had not read the entire SEC announcement that the financial regulators are following, it seems the SEC created additional requirements for publicly-traded companies to keep the capital markets running smoothly. Arthur Andersen has only been indicted at this point, but if it is found guilty of fraud, the firm would not be permitted to audit publicly-traded companies under SEC regulation, which comprises most of Andersen's work. Though Andersen's problems are serious, O'Rourke suggested that credit unions not throw in the towel on Andersen at this time. "I don't think they should cave in to knee jerk reaction and fire them because of Enron," he said. Instead, he offered, "The [credit union's] supervisory committee would do well to meet with Arthur Andersen and assure themselves that they do have the right professionals assigned to the engagement and also review their track record over the past several years with the credit union." He added if the committee is satisfied with this, there is no need for change at this time. Pringle agreed. "If I were advising [a financial institution], I would say: look at where you are in your audit. Do you have questions about qualifications, independence, or conflicts?" she said. From there, a credit union using Andersen should request representations from the firm, but do not rely solely on that. Next, contact NCUA or the appropriate financial regulator and then reevaluate whether items are being handled as they should be. Every dark cloud has a silver lining. Pringle commented that the Arthur Andersen case is good for the accounting industry to reflect on what it should and should not be involved in, such as providing an external audit and then being contracted to perform an internal audit. "We knew there were really significant issues, and now we've got this huge situation," she said. It is time to quit discussing the issues and start acting, she added. O'Rourke commented that he personally believed that Andersen "had some unfortunate occurrences," but overall the firm employs "high quality, competent people." [email protected]</p>