Auditing

AFC Sues Arthur Andersen

Restaurant franchiser charges defunct auditor with GAAP and audit-standards breaches.
Stephen TaubSeptember 8, 2004

The ghost of Arthur Andersen still manages to come to
life every so often.

The most recent example: The folks at AFC
Enterprises have sued the former accounting giant, two
of its former partners, and a former audit
manager.

AFC Enterprises, known its for Popeyes, Chicken & Biscuits, Church’s Chicken, and Cinnabon franchises, alleges the defendants violated generally accepted auditing standards and accounting principles,
committed auditing malpractice, and breached contracts between the parties. Those violations caused AFC to restate two years of financial statements and incur substantial costs, fees, and lost profits, the company charged.

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AFC, which filed the suit in the Superior Court of
Fulton County, Georgia, also seeks fees it paid the
now-defunct auditor from 2000 to 2002, according to
the Associated Press, which cited the lawsuit.

AFC also wants Andersen and three of its former
accountants to reimburse it for the sums it shelled
out to lawyers and other accountants to get its financials in shape. It is also seeking unspecified monetary damages, according to the report.

“We relied on Arthur Andersen to tell us if we had
violated any generally accepted accounting procedures
and standards, and they did not do that,” Neal Pope,
whose law firm represents AFC, told the wire service.

Patrick Dorton, an Arthur Andersen spokesman, told
the wire service he had not seen the lawsuit and
declined to comment.

The AP added that none of the accountants named in
the suit could be reached for comment.