Satyam’s books have been audited by Price Waterhouse since the financial year 2000-2001. It’s a separate and independent legal entity.
“I thought I’d be like Pied Piper. I thought I can sell dreams... that asset-creation is not a crime, that if you wanted to be Harshad Mehta come to the stock market,” the Big Bull told a business magazine after he was arrested in 1992.
Byrraju Ramalinga Raju is no Harshad Mehta, but he did try to become a Pied Piper, by trying to lead (or should we say mislead) the market about Satyam, a company he founded in 1987, by giving out wrong financial information.
Satyam’s books have been audited by Price Waterhouse, a member-firm of PricewaterhouseCoopers International Ltd — since the financial year 2000-2001. It’s a separate and independent legal entity.
The company’s balance sheet as on March 31, 2008 was signed by Srinivas Talluri, partner of Price Waterhouse, Hyderabad.
Before that Satyam’s books were audited by Messers Srivas and Pramod Kumar.
The company’s total assets as on September 30, 2008, stood at Rs 8,795 crore.
Of this cash and bank balances stood at Rs 5,313 crore which is nearly 60% of the total assets. This was overstated to the extent of Rs 5,040 crore. What people now want to know is how did the statutory auditors who have been auditing the company’s books for such a long time, not catch up on this?
“Even a kid could have caught onto this. All the auditor needed to ask was the bank statements of the various banks in which this (supposed) cash had been deposited or mutual funds it had been invested in. This is overstatement of Rs 5,000 odd crore we are talking about, not Rs 500. Either the auditor was hand in glove with Raju or there has been a serious error on its part,” said a middle level executive from a Big 4 consulting firm.
“Companies which are high on corporate governance try and change their auditors once every few years, though there is no legal requirement to do so. Satyam has had the same auditor for more than eight years now. Does that tell you something?” he said.
“The extent of manipulation seen is blatant considering major gaps in most obvious assets like cash and bank balances and other items,” said Suresh Surana, founder, RSM Astute Consulting Group, a chartered accountant firm.
Other than the amount of cash overstated, accrued interest to the extent of Rs 376 crore was stated on the non existent cash balances.
Since the cash balances were non existent, the accrued interest was also non existent. What experts cannot seem to understand is the fact that how can interest accrue on a fixed deposit and not be paid by the bank. Another obvious thing the auditor missed.
Other than this Raju said that liabilities were understated to the extent of Rs 1,230 crore, on account of the funds he had arranged by pledging his own shares and raising funds in his own personal capacity. Debtors position was also overstated by Rs 490 crore.
“If all or part of the declaration on figures mentioned in the letter are true, all people and firms associated with Satyam’s books of accounts should be brought under the scanner and legal action should be taken. This raises serious doubts about the involvement of auditors,” said Amar Ambani, vice-president (research), India Infoline Financial Ltd on Satyam Computer.
The Institute of Chartered Accountants of India now plans to take action against the auditor. “ICAI will write a letter to Price Waterhouse tomorrow and will seek an immediate reply on the issue and inform them about the process of investigation, which is on,” ICAI president Ved Jain told PTI.
All one needs to prove is he (auditor) was a party to the fraud. He can be booked under the Companies Act and the Chartered Accountants Act ... in case of negligence by the chartered accountant, we have a severe punishment,” Jain said.
Other than this the fact that Satyam is listed on New York Stock Exchange is bound to get the Securities and Exchange Commission of the United States interested in the gross negligence of the auditor, feel experts.
A few years back when the Enron accounting fraud happened, their auditors Arthur Andersen went down with Enron. Will we see the same thing for Price Waterhouse as well?
“We have learnt of the disclosure made by the Chairman of Satyam Computer Services and are currently examining the contents of the statement. We are not commenting further on this subject due to issues of client confidentiality,” a statement released by Price Waterhouse said.
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