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ARTHUR ANDERSEN GAINS ERNST YOUNG, AFA DROPS OUT

The Greek branch office of Ernst Young, which is responsible for Bulgaria has decided to give up its local company Ernst Young AFA. In that way the international auditor wants to part from Reni Yordanova and Valia Yordanova who own 51% of the Bulgarian company. It has not been decided yet if Ernst Young AFA will be declared in liquidation or if the international company will sell its shares to its Bulgarian partners. Reni Yordanova and Valia Yordanova were partners in AFA and became representatives of Ernst Young after the two companies' merger in 1998. Since then the firm has been named Ernst Young AFA. This was the only case when the local partner gained such an acknowledgement (the Bulgarian partners of KPMG, PriceWaterhouseCoopers, and even of Deloitte Touche cannot boast of such a thing). It is claimed that the parting has been caused by disagreements between the partners and more precisely the fact that Reni Yordanova and Valia Yordanova objected the merger with Arthur Andersen, imposed from on top. It was agreed back in April 2002 after the international auditing company lost a considerable part of its business as a result of the accounting scams in the USA, which began with its participation. But the merger between Ernst Young and Arthur Andersen Bulgaria would had led to a decrease of the two auditors' stake in the new company's capital, even below the required blocking quota, which is the main reason for their disagreement. As this was not the first case of serious disagreements, the headquarters in Greece decided to take the radical measure of giving up the company Ernst Young AFA.Thus, the road for the merger of the two local auditing companies has been cleared. The small detail is that the Greek division of Ernst Young in Bulgaria will directly enter into partnership with Andersen. Arthur Andersen Bulgaria will be the leading partner in the company to be set up, because it has a larger share on the local market. The company will merge into the new structure with its present personnel and big clients. Roumyana Gicheva, incumbent Director of Arthur Andersen, who has previously worked for Ernst Young as well, will probably head the company, set up by the merger. Some 30 employees of Ernst Young are expected to join the new company, as well as most of the clients, among which are Bulgartabac, Coca Cola, and Bulstrad.The merger between Ernst Young and Arthur Andersen in Bulgaria was contemplated after the failure of negotiations for a merger between the failed US company and KPMG. Thus, in April 2002, after the agreement between Andersen's regional offices and local auditors, its heads for Central and Eastern Europe picked out Ernst Young as a partner of the seven regional firms of the troubled company. Since then negotiations have been dragging on due to the disagreements with the Bulgarian partners in the auditing company.

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