Little Enron

Andersen's Czech office is joining Ernst & Young in order to get away from Enron, but it's gaining IPB and Chemapol in the process. Týden wrote this week that a Kč 2.9bn hole has been found in Chemapol's books. Chemapol, like IPB, got an unqualified audit from Ernst & Young soon before disaster struck. President Lubomír Harna of the Union of Auditors told Hospodářské noviny that Chemapol is the CR's "little Enron," and SEC Chair František Jakub said in HN that the problems at IPB were widely known at the time of the unqualified audit. Jakub told us yesterday that the SEC is working on a proposal for helping to avoid accounting scandals by increasing disclosure requirements. E&Y stands by its audits of Chemapol and IPB. It's in a very difficult position. If it admitted any wrongdoing, its Prague office could end up like Andersen.