During the meeting, Hulse passed around a memo, disclosing that PwC had erred in approving the accounting treatment for the off-balance sheet entities, the suit says.

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Despite the negative nature of McNulty's report, long term he said he thingsthe company should continue to benefit from its cost-cutting programs, as well as efforts to remove debt from is balance sheet and consolidation in the water treatment industry.

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However, evidence emerged in the Andersen trial that Mr Fastow had rejected a particular accounting treatment for some of the off-balance sheet partnerships, adopting instead something that did not conform with American accounting rules.

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