CHICAGO -- Filing for bankruptcy might be the best remaining option for Arthur Andersen LLP if the once-mighty accounting firm hopes to stop an exodus of clients and employees and find a buyer to salvage its operations, experts say.

However, Charlie Leonard, an Andersen spokesman, said the company has no plans to seek bankruptcy protection.

"There is no plan for bankruptcy," he said in a conference call with reporters on Thursday.

A Chapter 11 federal bankruptcy filing, while dire, could help chances to swiftly resolve civil liabilities linked to Andersen's role as chief auditor for Enron.

But such a move would almost certainly signal the end of its 94 years as an independent company, according to those who track the industry.

"A bankruptcy would be a business strategy to save and protect as many jobs and assets as possible. But it means Andersen itself is done," said Arthur Bowman, editor of the industry publication Bowman's Accounting Report.

Thursday's criminal indictment by a federal grand jury might already effectively spell its demise, Bowman and other observers said.

"I don't see an independent Arthur Andersen in the future, no matter what they do," said Michael Perino, a securities law expert at St. John's University law school in New York.

"Arthur Andersen's reputation is so sullied right now that ... if they do file a bankruptcy action, the only likely outcome is that the remaining pieces get bought up by somebody."

Andersen, indicted on obstruction of justice charges for shredding Enron-related documents, reportedly held out the possibility of bankruptcy in merger talks with other Big Five accounting firms this week.

"We are looking at many different options, both inside and outside the profession, and working on many reforms to set a new standard for audit quality and restoring public confidence," spokesman Patrick Dorton said.

In an effort to restore its tarnished reputation, Andersen recruited former Federal Reserve chairman Paul Volcker in early February to lead an oversight board that would make sweeping reforms at the firm.

Volcker's board released its first set of reforms on Monday, which included splitting Andersen into separate accounting and auditing units, but the fate of the reform process is uncertain now that Andersen has been indicted and its future is in doubt.

Volcker, speaking in an interview just minutes before the indictment against Andersen was announced, said that on Wednesday he had told a panel of experts he had assembled for his three-member board that the outlook for Andersen was "rather dim."

But the panel, which included John C. Bogle, founder of the Vanguard mutual funds group, decided that it would stay together in order to promote reforms in the accounting industry even if Andersen went under, Volcker said.

Volcker wasn't available for comment after the indictment was announced.

One after another, the options preferable to bankruptcy have failed for Andersen -- riding out the scandal, lining up a buyer, avoiding criminal charges.

A Chapter 11 filing would enable the Chicago-based company to convert the more than three dozen lawsuits filed against it into bankruptcy claims. Its earlier-rejected offer of as much as $750 million to settle all claims might get new consideration, since claimants would otherwise be faced with waiting in line in bankruptcy court behind banks and other secured lenders.

Bankruptcy would establish a liability "firewall," according to Pennsylvania State University accounting professor Mark Dirsmith, reducing the risk for any firm taking over Andersen assets.

"Going into Chapter 11 is in everybody's interest except competitors'," said Ashish Nanda, an associate professor at Harvard Business School. "It might stop the vicious cycle of clients walking away and of that leading to professionals and partners walking away. It might be good for claimants and good for the public to have five big firms rather than four."

Numerous Fortune 500 clients have fired Andersen as their auditor -- Delta Air Lines, FedEx Corp., Freddie Mac, Household International, Merck & Co. and SunTrust Banks in the past two weeks alone -- and more are considering doing so as they file proxy statements and hold annual meetings.

Thursday, Birmingham, Ala.-based SouthTrust Corp. said its board of directors requested proposals from accounting firms to audit its financial statements. It's current auditor is Andersen.

Some of the clients who are worried about Andersen collapsing might stay on if the company goes under federal bankruptcy protection, Nanda said, because of the difficulties for large corporations in switching auditors.

But turning the Big Five into the Final Four would result in less competition in the auditing market. Perino said that means auditing fees would rise, especially if firms are not allowed to perform auditing and consulting for the same company.

The only comparable precedent to Andersen's situation is when Laventhol & Horwath, then the nation's seventh-largest accounting firm, filed for bankruptcy and collapsed under malpractice lawsuits. Andersen, formerly the world's biggest accountant, is now No. 5.

Jonathan Hamilton, editor of Public Accounting Report, an industry publication, said Andersen clients and staff will go to other firms and "the accounting profession will move on."

Andersen's collapse, while unthinkable until recently, is resulting from more than one scandal, he said.

"This isn't just Enron dragging them to the pavement here -- it's Sunbeam, Waste Management, Baptist Fund, Global Crossing," he said, citing other mishandled audit accounts.

"It's kind of like the boxer -- is it the one final punch that puts them out or the 500 over six rounds? It's the beating they've taken."