KPMG and Arthur Andersen in Canadian merger talks

Arthur Andersen LLP's Canadian division says it is in merger talks with accounting firm KPMG LLP.

Andersen Canada's move toward a merger with the Canadian division of KPMG is in a bid to disassociate itself from its parent company in the US.

The US firm is embroiled in the accounting scandal surrounding Enron.

"We have commenced the process of conducting due diligence," KPMG Canada Chairman and CEO Bill MacKinnon said in a press release.

"We are working towards an agreement. Negotiations will be required to address the business and legal issues associated with bringing the two firms together. Any agreement will require approvals from the partners of both firms," the statement says.

Arthur Andersen's divisions in other countries have also begun merger talks with other firms as they try to escape being associated with the US parent company.

Andersen's US arm has pleaded innocent to a charge of obstruction of justice for allegedly shredding documents and deleting computing files related to Enron.