IDB Retains Arthur Andersen as Its Auditor : Accounting: The firm’s previous auditor quit over financial reporting rift.

IDB Communications Group, whose accounting firm resigned late last month in a dispute over the company’s financial reporting, said Sunday it retained Arthur Andersen & Co. as its new auditor.

Andersen’s agreement to take the job is an important victory for the 10-year-old Culver City-based telecommunications firm, which has lost considerable credibility with Wall Street since its former auditor, Deloitte & Touche, suddenly walked out.

Like Deloitte, Andersen is one of the country’s largest accounting firms, so its willingness to accept IDB as a client may help assuage investor fears that the company’s problems are deep-rooted.

IDB also reiterated that its chief financial officer, Rudy Wann, will no longer report to President Edward R. Cheramy, who was the key figure in the accounting dispute with Deloitte. Wann will now report directly to 38-year-old IDB Chairman Jeffrey P. Sudikoff.

Cheramy, 50, was not mentioned in a news release issued Sunday.

Dick Poladian, managing partner of Andersen’s Southern California practice, indicated in IDB’s announcement Sunday that Andersen signed on only after “discussions with the company’s former auditors and its other legal and financial advisers.”

IDB said that Andersen, as part of its engagement, “will examine the company’s internal financial controls and reporting procedures, and will issue its recommendations to the audit subcommittee (of the IDB board), which is currently examining those controls and procedures as part of its review of the circumstances surrounding” Deloitte’s walkout.

IDB, which has mushroomed in size since 1992 via acquisitions, is largely a provider of domestic and international long-distance communications for companies and other commercial users, including government entities. IDB reported net income of $10.9 million last year on revenue of $311 million.

Beginning in the first quarter of 1992, Deloitte began to question the accuracy of IDB’s financial results. While its initial concerns were resolved to its satisfaction, Deloitte required that IDB allow it to perform “interim” reviews of the company’s finances each quarter, as a watchdog function.

Deloitte apparently had no further major problems with IDB’s numbers until the first quarter of this year, when it questioned $10.5 million of the $15.1 million in pretax earnings that IDB initially planned to report.

In April and May, Deloitte continued to bicker with IDB’s Cheramy over the first-quarter results. IDB ultimately agreed to drop certain items from income, but immediately suggested “new and previously unrecorded items” to replace the income in question, Deloitte said.

Unable to agree with IDB on the new numbers, Deloitte resigned May 23. When the news became public on May 31, IDB’s stock plunged $7.375 to $7.125.

On Friday the stock jumped 45 cents to $8.33 a share, though IDB didn’t report Andersen’s selection as auditor until Sunday.