Price Waterhouse cannot escape onus; liability to vary

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New Delhi: While the jury is still out on who the different collaborators are and the extent to which they acted in cahoots with the wrongdoers in Satyam, it is emerging that the role of Price Waterhouse, which has been the company’s auditor from 2000, in the entire debacle is kmuch more entrenched than thus far disclosed.

Satyam Computer Services Ltd has branches or subsidiaries in over 60 countries and its statutory auditor in India, Price Waterhouse, would have had to sign off on branch or subsidiary audits and the consolidated quarterly statements with full knowledge of the standing of branches or subsidiaries. Satyam’s accounting disclosures would naturally have to be in compliance with Indian regulatory standards. However, by virtue of being listed in the US on the NYSE, Price Waterhouse would have also conducted an audit of Satyam under the Sarbanes Oxley Act (SOX) in the US.

Therefore, Satyam would have had to clear regulatory requirements from both an Indian and American context.

Price Waterhouse, which audited the Satyam accounts, is one of the several audit firms that form a network with the overarching PriceWaterhouseCoopers Ltd. The latter provides only consultancy services in India but abroad this is the firm the world recognises. The audit firm’s approval to Satyam’s balance sheets in the US and Europe could put the parent entity in trouble.

“While it may be the main client service partner in India who would have signed off on the balance sheet and profit & loss statements, there would be an entire team from Price Waterhouse collectively involved in giving clearances to the audit reports and the misappropriations conducted by Satyam”, says Sushil Sharma, senior independent chartered accountant, in Delhi.

He says there is no ambiguity to an auditor in the role he or she needs to play in reviewing the books of a company. The basic principles independent of any country’s accounting standards require an auditor to study bank balances and the cash balances of the company. This entails first studying a “trial balance” which is a summary of all ledger accounts a company maintains and the company’s profit & loss account, and it is only after these recordings are found satisfactory that the balance sheet is signed off by an auditor and made publicly available.