NEW YORK (CNN/Money) - Arthur Andersen and KPMG International jointly called off their planned merger Tuesday, which would have combined the firms' non-U.S. partnerships, due to the continued defection of Andersen member firms to join rivals.

Andersen and KPMG said in a statement Tuesday that partnerships in several countries outside the United States are continuing merger discussions. But a global merger has been called off.

"In view of decisions by certain individual firms to pursue different directions, it is clear that a deal embracing all the non-U.S. firms is not achievable," the firms said.

The break-off occurred when Andersen's member firm in Spain inked a deal Tuesday to join with Deloitte Touche Tohmatsu. The partners of both firms have approved the deal, Deloitte said.

However, several firms -- such as practices in Germany and the United Kingdom -- are still in negotiations with KPMG, Andersen spokeswoman Anne Groves said.

Andersen and KPMG had hoped to complete a transaction by October. Individual Andersen partnerships will now pursue their own deals.

Andersen, which is fighting a federal indictment for allegedly obstructing justice when it destroyed Enron Corp. documents, announced its merger talks with KPMG on March 18. Since the announcement, several member firms around the world have broken ranks and joined rival firms.

News of the break-off comes as rival Ernst & Young continues talks with several Andersen partnerships around the world, a spokeswoman said. Ernst & Young has so far scored three Andersen affiliates -- in Australia, Russia, and New Zealand.

Press reports Tuesday said that Andersen practices in Singapore, Philippines, Malaysia and Taiwan were set to join Ernst & Young, but an Ernst spokeswoman declined comment, saying only: "We are still in talks with several practices in Asia."

Andersen affiliates in China and Hong Kong agreed late last month to join PricewaterhouseCoopers.

"We are still talking to as many Andersen practices as we can," the Ernst spokeswoman said. "We've had a number of positive discussions."

Ernst is negotiating with Andersen firms on a country-by-country basis, the spokeswoman said. CNN/Money reported last week that Ernst & Young was in talks with several Andersen firms globally.

Andersen Worldwide SC, the worldwide parent organization that oversees the U.S. partnership, is meeting in London. However, Andersen's merger talks with KPMG have taken a priority, a source familiar with the situation told CNN/Money.

The board is still expected to pick a successor to CEO Joseph Berardino, who announced his resignation on CNN's Lou Dobbs Moneyline last week. But an announcement is now expected later this week and possibly Wednesday, the person said.

Louis Salvatore, head of Arthur Andersen's New York-area regional practice, has emerged as a leading candidate for the top job.

Chicago-based Andersen also turned down a chance to defer or avoid prosecution over its role in the destruction of Enron documents because it didn't want to acknowledge wrongdoing, a source familiar with the negotiations said.

The New York Times first reported Tuesday that the Justice Department offered the company a deferral of prosecution if the company acknowledged the wrongdoing and agreed to restrictions similar to probation. Under the offer, the company then could have avoided any prosecution in the case if it avoided any additional wrongdoing for a number of years.

The embattled auditor's executives rejected the offer of deferred prosecution out of fear that the acknowledgement of wrongdoing would be as devastating to its outlook as an indictment or guilty plea, the report said.

The company has been struggling with a loss of clients in the wake of the indictment, and its executives have said it needs to quickly clear its name if it is to survive. Company executives have admitted that Andersen employees destroyed Enron documents, but said the wrongdoing was limited to the Houston office.

The Times said the possibility of a deferral of prosecution could again be explored with new leadership of the firm. But it described the window for such discussions as being small.

Stanley Brand, an Andersen attorney in Washington, said settlement talks between Andersen and the DOJ have not been revived.

"Theoretically there is always room for a settlement," he told CNN/Money.