The Texas State Board of Public Accountancy also is asking for at least $1 million in fines and penalties.
The accountancy board reached its decision after a six-month investigation and is asking for a hearing on its recommendation before the State Office of Administrative Hearings. A date has not been set.
Chicago-based Arthur Andersen acknowledged that its Houston office shredded a significant number of documents related to Enron audits last fall. The shredding came about the same time federal regulators began investigating possible accounting improprieties.
An Andersen spokesman in Washington, D.C., did not immediately return a telephone call seeking comment.
Andersen is on trial in Houston for destroying documentation related to Enron audits. Enron, based in Houston, declared bankruptcy Dec. 2.
Thursday's move is another setback for Andersen, which has lost more than 500 publicly traded clients, or nearly a quarter of the 2,300 companies whose books it audited last year.
Andersen also was the auditor last year for as many as 32,000 private, mostly smaller companies. It's not known how many of those have replaced it.
State Rep. Steve Wolens, D-Dallas, had asked the board in January not only to investigate Andersen but also the auditing standards of Enron's accountants.
William Treacy, executive director of the State Board of Public Accountancy, would not say Thursday whether Enron was investigated or if the board plans to take any steps regarding the company's internal accountants.
Under statute, the board is prohibited from disclosing investigations unless it receives permission to disclose the investigation, has issued a final order in a disciplinary action resulting from an informal proceeding or has held a formal public hearing on the matter.