Arthur Andersen is facing "hard questions" about its role in the Enron collapse and is losing business, the accounting firm's chairman and chief executive, Mr Joe Berardino, has acknowledged.

One of the Chicago-based company's major corporate clients, Delta Airlines, has begun a search for a new independent auditor, the Wall Street Journal reported yesterday. And New York is considering a ban on the use of Arthur Andersen by city agencies, according to the New York Times.

Companies are worried that Andersen's competence will be hampered as it deals with law suits arising from congressional and federal hearings into its role in the collapse of the Houston energy trader. It has been severely criticised for failing to alert investors to Enron's problems and for shredding Enron-related documents.

If Delta switches to a new auditor, it would be the first major defection from Andersen since Enron filed for bankruptcy protection in December, and could lead to other big clients abandoning the company, which has 85,000 employees in 84 countries.

Mr Berardino, who on Thursday made a presentation to Delta in Atlanta asserting that it remained in a strong position to handle the airline's accounts, said support remained high among clients and the firm had no need to merge with a rival as a way out of its troubles.

New York City comptroller Mr William Thompson has asked Andersen officials to meet him today to explain why the company should not be removed from its list of 97 approved firms. Fedex is also reviewing its relationship with the Big Five accountancy firm. HERC Products of Phoenix, Arizona, and Keystone Automotive Industries have already dropped Andersen.

Meanwhile, Enron selected Mr Stephen Cooper, of Zolfo Cooper in New York, as interim chief executive and chief restructuring officer to guide it through bankruptcy proceedings and investigations. Last week, Enron chairman and chief executive Mr Kenneth Lay resigned as chairman and chief executive.

Mr Lay's wife, Linda, said yesterday that her husband was closer to President George W Bush's parents than they were to the current president and his wife.

She said: "We certainly know George W and Laura and I have, I think, a very good relationship with them." But she stated they were closer to the parents "who are wonderful people, wonderful friends".

President George W Bush's relationship with Mr Lay has been under close scrutiny since it was reported that he received more than $500,000 (€578,235) in contributions from Enron and Mr Lay during his political career.

The former Enron chairman and chief executive, who was also a leading contributor to the elder Mr Bush, was one of 214 so-called Pioneers who each raised at least $100,000 for the Bush 2000 presidential campaign. Enron wrote a check for $100,000 for Mr Bush's inaugural committee, and Mr Lay added another $100,000.

In her second interview in two days with NBC to defend her husband, Mrs Lay said the much-publicised nickname "Kenny Boy", used by Mr Bush in a letter to Mr Lay, originated with her - not the president. "That's my nickname for my husband, which he overheard," she said.

"Ken's mother called him Kenny and I called him Kenny Boy." She said her husband had not spoken to the president since the Enron collapse, but had been in contact with his father who, she said, had been very supportive.

Enron filed for bankruptcy in December after revelations that executives had created thousands of entities to hide millions of dollars in debt.