"[PWC], the long-standing auditor of stricken software company Satyam, faces the prospect of disciplinary action by market regulator SEBI if it is found that it failed to verify the autheticity of financial documents furnished by the company. ... Independent auditors feel the regulator's approach may be too harsh. Officials at audit firms say that if they start verufying the veracity of all documents given to them, would become a full-fledged investigation into the company. ... 'How can we verify the authenticity of millions of pages while auditing a company with a turnover of thousands of crores in a few days?' said an auditor working with one of the big four accounting firms, who asked not to be named. Auditors certify that the financial statement reflect a "true and fair" picture of the state of affairs of the company, and not an accurate picture", he added. The SEBI official, however, rubbished this argument", my emphasis, Junior, 8 January 2009 at http://jraccountant.blogspot.com/2009/01/pwc-epic-indian-failure.html.
"Debate in Mumbai is now focusing on whether Satyam, India's fourth-largest computer software company, or its multinational auditors [PWC], was more to blame for what is possibly corporate India's worst scandal. ... Contrary to perceptions that this is a brand new financial scandal, the Satyam fraud appears to be the latest variant of financial scams involving manipulating information with the aim of duping investors, while involving regulatory and accounting practices not traditionally used in India. ... The general verdict of accountants in Mumbai is that Satyam's auditors blew it big time, whatever fraud and forgery the management could have produced to hoodwink them in a scandal that is estimated to have cost Satyam investors $2 billion on January 7 alone as the stock plunged by 77% on news of the fraud. ... PWC, formed in 1998 through the merger of Price Waterhouse and Coopers & Lybrand of London, faces a choice of either being found so utterly incompetent that it could not spot a $1.5 billion-sized accounting crater, or that it was party to the investor fraud that presented an annual 24% growth rate in Satyam balance sheets instead of an actual 3% growth rate. ... In other words, Satyam auditors have not apparently undertaken what traditionallly would have been the minimum independent verification of the client's accounts as a chartered accountant firm is supposed to do", Raja Murthy, 9 January 209 at http://www.atimes.com/.
"[PWC] , which signed off on [SCSL] finances for several years without detecting the fraud by Satyam's founder and chairman, defended its procedures on Thursday. [PWC] said, in a statement send by email, 'The audits were conducted by [PWC] in accordance with applicable auditing atandards and were supported by appropriate audit evidence.' It said it is cooperating with regulators. ... A [PWC] spokesman declined further comment. Srinivas Talluri, the [PWC] partner who signed off on Satyam's most recent annual accounts in Hyderabad in April last year, couldn't be reached. ... Also in his letter, Mr. Raju said the company's cash and bank balances had been inflated by more than $1 billion dollars. 'This is the easiest thing to verify,' said Vinesh Chandok, national managing partner of accountant Grant Thornton", JR and Scott Patterson at the WSJ, 9 January 2009.
"Indian authorities moved to contain the fallout from the fraud at [SCSL] by arresting the company's founder, firing its remaining board members and launching an accounting review of India's biggest publicly traded companies. ... In an unprecedented action, the government also said it will install directors on a new 10-member Satyam board that will meet within one week. A board meeting that had been scheduled for Saturday was canceled. ... The Securities and Exchange Board of India [SEBI], the chief markets regulator, said Friday it will review auditors' working papers relating to companies in the Sensex and the National Stock Exchange 50-share index in a bid to boost investor confidence in financial disclosures. ... C.B. Bhave, SEBI's chairman ... said recent results for big companies would be subject to peer review by another auditor; other company results will be subject to peer review by accounting firms on a random basis", Eric Bellman and John Kumar at the WSJ, 10 January 2009.
"If this scandal proves anything to transnational investors and corporations it would be that doing business in India may be less risky than doing so in the more criminal friendly USA. India is demonstrating that it has very little tolerance for white collar fraud and they are showing that corporate criminals will be swifly punished. It is yet to be seen if most of those arrested will bribe themselves out of trouble but so far the punishment is more severe than aything we see in the U.S. In contrast to India, the U.S. coddles its corporate criminals by allowing them to stay on the job with big pay raises, or giving them golden parachutes so that they can retire in the Bahamas", Rob Sanchez, 12 January 2009 at http://blog.vdare.com/achieves/2009/01/12/satyam-scandal-wont-change-anything/
"Suresh Senapathy, the chief financial officer of Satyam rival Wipro (WIT) said it was 'impossible to imagine that this could happen. I can't believe that five or six years' worth of misappropriated books and accounts missed the scrutiny of auditors'," Elliot Wilson at Barron's, 12 January 2009.
"The board at troubled [SCSL], freshly appointed by the Indian government, said it is looking for a new auditor. ... 'New independent accountants that we appoint shortly will restate the numbers and confirm the veracity of those numbers,' [Deepak] Parekh told a news conference in Hyderabad following the first meeting of the government-appointed board", Eric Bellman and JR at the WSJ, 13 January 2009.
"Indian regulators and police are trying to unravel how the chairman of [SCSL], who has admitted to falsifying corporate figures, may have managed for years to fool his top financial officer and the company's audit committee. ... Satyam's chief financial officer, Srinivas Vadlamani, was arrested over the weekend on suspicion that he was involved with fraud, forgery and other charges. In a written statement, presented in the local courts Sunday, Mr. Vadlamani said that while he wasn't directly involved in fudging the company's accounts, he knew that there was something suspicious for more than five years. The statement didn't say why he didn't report the suspicions. He said he wasn't in charge of keeping track of the company's deposits. 'I was specifically asked not to look into that area of operations,' Mr. Vadlamani said in the statement. ... Mr. Vadlamani didn't admit to any crime in the statement. ... Sandeep Parekh, a professor at the Indian Institute of Management in Ahmedabad ... said another clue came when an analyst from Mumbai-based securities firm Kotak Securities Ltd. [KSL] raised questions about why the company was keeping such large amounts of money interest-free current accounts rather than a 9% fixed deposit with a bank. Kawaljeet Saluja, a senior research analyst with the institutional equities arm of [KSL], raised the question during an investor call with Satyam in April, a [KSL] spokeswoman said", my emphasis, Eric Bellman and JR at the WSJ, 14 January 2009.
"[SCSL] began a search Wednesday for a new chief executive and new chief financial officer, while the software exporter's board named Deloitte Touche Tohmatsu and KPMG as interim auditors to assess the company's financial health. ... The new board had said Monday it would name new auditors to assess the true financial condition of Satyam, based in Hyderabad, India. Satyam is India's fourth-largest software exporter by revenue. ... In a separate statement Wednesday, [PWC] said its audit opinion on the financial statements of the software exporter may be rendered inaccurate and unreliable. ... 'We placed reliance on management controls over financial reporting and the information and explanations provided by management and also the verbal and written representations made to us during the course of our audits,' the firm said", Romit Guha at the WSJ, 15 January 2009.
"Minutes from a crucial December board meeting at [SCSL] shed light on how the giant outsourcer's directors would up approving two deals that were a key part of the massive fraud that has since engulfed the company. ... The deals at issue were the acquisition by Satyam of two infrastructure companies--Maytas Properties Ltd. and Maytas Infra Ltd.--that are run by the sones of the founder and then-chairman of Satyam, B. Ramalinga Raju. Mr. Raju also had a financial interest in the companies. ... In a prepared statement, Ernst & Young said it had prepared the valuation for another purpose and was 'not given to understand by any party, explicitly or implicitly, during the valuation exercise, about Satyam's plans to acquire Maytas Properties.' ... 'The proposed acquisitions have two complicated aspects--unrelated diversification, and realted party transcation,' said Krishna Palepu, a Satyam director and a Harvard Business School professor of corporate governance,who participated in the meeting by telephone conference, according to the minutes", Niraj Sheth and JR at the WSJ, 16 January 2009.
Shut the World Bank.
This is too rich, a Big 87654 Indian Chartered Accountant doesn't think his clients financials need be stated accurately. He exposes a dirty secret of the CPA business, i.e., given the Big 87654's time constraints, many times they can't finish the work. It would take something lacking in Big 87654 partners to tell the SEC we can't finish audits when you want, a backbone. The damn SEC keep moving up SEC registrant filing deadlines. That's crazy. Indians use crores, 10 million and lakhs, 100,000 as counting units. 10 million rupees is $208,000 at R48.1 = $1.
I can't believe it either.
We'll see if the new auditors conclude PWC's audit was deficient.