The company decided to switch to Ernst & Young "given the break-up that started to occur within Arthur Andersen's global practice in the past few weeks", it said in a statement yesterday.
Arthur Andersen provided both audit and non-audit services for Oracle. The practice of having an accounting firm such as Arthur Andersen sell non-audit consulting services - including IT consulting - to clients that it also audits has come under fire in recent months as a result of the Enron collapse.
Although legal, the selling of non-audit services to audit clients compromises an auditor's independence and leads to conflicts of interest, critics have charged. As in Oracle's case, Arthur Andersen provided both audit and non-audit consulting services to Enron, whose accounting practices are at the centre of its bankruptcy scandal.
Arthur Andersen was paid $700,000 (£487,000) for audit services for the year ended 31 May, 2001, according to a filing Oracle made with the US Securities and Exchange Commission (SEC) in August. It also paid Arthur Andersen $1.1m (£765,300) for the design and implementation of financial IT systems and $5.3m (£3.7m) for other consulting work, including tax preparation, tax advice and business consulting.
Oracle said that Arthur Andersen "has done excellent, professional work" for the past 15 years.
An Oracle spokeswoman declined to comment on whether the company would continue giving non-audit consulting work to Arthur Andersen, saying Oracle would not comment on this matter beyond what was said in the statement.
In February, Arthur Andersen said it would stop designing and implementing financial IT systems for clients it audits. More recently, the company has pledged to separate its consulting practices entirely from its core audit business, thus abiding by a mandate from an independent oversight board it created this year to reform its business.
IT and related business consulting services generated about $1.7bn (£1.2bn) in revenue for Andersen Worldwide for the year ended 31 August 2001.
Oracle joins a long list of audit clients that have fired Arthur Andersen firms in the US and abroad this year as a result of the Enron scandal. Recent published reports put that figure at around 150 audit clients to date.
This year, PricewaterhouseCoopers announced it plans to separate via an initial public offering its management consulting business, PwC Consulting, which provides a broad range of IT consulting and services. Deloitte Touche Tohmatsu made a similar announcement this year regarding its IT consulting unit, although it has not given details of how it will separate it.
Ernst & Young sold its IT consulting services unit to Cap Gemini in 2000 and now provides a limited number of IT advisory services. KPMG spun off its consulting business into an independent company called KPMG Consulting early in 2001 but, like Ernst & Young, still provides limited IT advisory services.
Both Ernst & Young and KMPG have said that the IT services they provide are of an advisory nature - as opposed to a more hands-on consulting approach - and, therefore, do not pose conflict-of-interest concerns.