Date:09/01/2009 URL: http://www.thehindu.com/2009/01/09/stories/2009010959281700.htm

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Role of Satyam auditors come under scrutiny

A.Saye Sekhar

Have they blindly trusted account statements?

— PHOTO: Satish.H

United We Stand: Employees of Satyam Computer Services displaying the spirit of unity at Satyam Infocity facility in Hyderabad on Thursday.

HYDERABAD: After the startling revelations by B. Ramalinga Raju, who resigned as Satyam Chairman on Wednesday, fingers are now being pointed at auditors, the PricewaterhouseCoopers. Have they blindly trusted the account statements produced by the company or did they have substantial evidence to believe the numbers?

While auditors can accept “letters issued by banks” as proof of balance of funds, the Securities and Exchange Board of India (SEBI) does not proceed legally against a company unless there is prima facie evidence.

Institute of Chartered Accountants of India southern regional council chairman C. Muralikrishna said most of the SEBI regulations were intended to be self regulatory and companies were expected to comply with them.

“There are three ways of auditing: verification, confirmation and certification [declaration by the company being audited], depending on the extent of audit and the information to be verified. In the normal circumstances, auditing is different from investigation.

A certain amount of trust is reposed by the auditors in the information furnished by a client,” Mr. Muralikrishna told this correspondent on Thursday.

Two issues

Mr. Raju claimed that the money never existed. There were two issues – omission and commission.

The company omitted to record a Rs. 1,230 crore liability in the books and committed an erroneous recording of assets, which did not exist.

The auditing firm could have raised the question what the company proposed to do with “such a huge cash pile.

The auditors could be questioned whether they exercised proper diligence and paid the necessary professional attention to their work, which included confirmation of large balances in banks. Considering that these were significant amounts, where was this money coming from?

Corrections and Clarifications

The third paragraph of a report "Role of Satyam auditors comes under scrutiny" ("Business" page, January 9, 2009) gave the designation of Mr. C. Muralikrishna as Institute of Chartered Accountants of India (ICAI) southern regional council chairman. He is the former chairman.