Ernst & Young has sunk any talk of a proposed merger with troubled accounting giant Arthur Andersen LLP.

The firm issued a statement this afternoon, noting, “After reviewing the possibility of combining with Andersen, Ernst & Young has concluded that as long as Enron and other Andersen litigation matters are unresolved, it is not in the best interests of our people, clients, and our firm to pursue such a combination.”

Ernst &Young says that it informed Andersen’s leadership of the decision this morning.

Earlier talks with Deloitte & Touche have reportedly faltered too. Andersen is suffering from major client defections in the wake of the Enron scandal.