Price Waterhouse competence & integrity come into question

Neha Pal, Saikat Neogi
Posted: Thursday, Jan 08, 2009 at 2350 hrs IST
Updated: Thursday, Jan 08, 2009 at 2350 hrs IST

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New Delhi: The biggest question mark on the Satyam fraud is how a Sensex-30 company carried a non-existent cash reserve of Rs 5,040 crore on its balance sheet that passed muster with all regulatory bodies, in India and abroad, and was certified correct by its audit firm—Price Waterhouse, the Indian arm of PricewaterhouseCoopers (PwC).

Records show fictitious accruals remained on the books of Satyam Computer Services Ltd for years. The company’s balance sheet showed reserves and surplus of Rs 2,517 crore in March 2004. That sum rose to Rs 7,221 crore by March 2008.

But corporate law practice professionals like Namrata Mehta are sure that it would be difficult for shareholders or any other stakeholder to act against the auditors under the Indian Law of Contract. On its part, Price Waterhouse issued a cryptic statement late in the evening, saying, “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.”

Despite this escape clause, professionals said many check & balance methods were possibly not done by the auditors, while there are chances of forgery by the IT company in the records provided to the auditors.

“It seems that the mandatory accounting and auditing tools were not followed by the audit firm and it would be too naïve to say that they did not have any clues about it. Such kinds of frauds do happen in small unlisted companies, but the Satyam fraud is unprecedented in the history of corporate India and is much beyond the issue of corporate governance,” says KH Viswanathan, executive director of Mumbai-based accounting firm RSM Astute Consulting.

Price Waterhouse has an impressive list of close to 50 clients in India. They include multinationals like Bayer, Bosch, Colage-Palmolive, Glaxosmithkline, Novartis and domestic infrastructure companies like GMR, Lanco, Reliance Infra, Reliance Power and Simplex. UB, United Spirits, Max India are also PwC clients. Some IT companies associated with PwC are HCL, Info Edge, Mastek, Moser Baer and NIIT.

The biggest weakness of PwC is that Price Waterhouse is just one among a clutch of audit firms that carry the PwC label in India, but not necessarily having the level of competence that characterises the mother firm, which is PwC International. In India, the latter can only provide consultancy services because laws here allow only domestic firms to do audit.

Analysts...

Comments

» Repeat performance by auditors!

Posted by Shiv Shankar on 2009-01-14 16:19:24.702136+05:30
Anyone remembers Mumbai firm where again PWC were auditors? and books were cooked? Agarwal was an MD. They used to keep fruits daily for staff. PWC really sounds to be in a game of cooking books!They been in lime light for wrong reasons. Yes, I agree to the post of arun subramanian. Auditors job is to cross verify and bring frauds to lime light. PwC's failure for this, since years may mean their consent to it!

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» price waterhouse role

Posted by anand mohan on 2009-01-09 18:24:58.13025+05:30
The question is very simple for every statutory auditor be it among global four auditing firm or otherwise. It is the obtainment of bank certificat from the bank with which the concern is maintaining account and checking of bank reconciliation statement (prepared by the accounts deptt of the organisation )is the basic requirement just to check/certify the figures of bank balance depicted in the balance sheet(before certification by the auditors). Why PWC is not coming out with a simple statement whether they have bank certificate and bank reconciliation statement as on 31.3.08, for which the statutory audit was done ,in their audit working paper file? It will clear the whole issue of non existent bank balances within no time. When satyam is a listed company(and everyone knows the bank balance shown in annual reports) by no stretch of imagination this information can be cloaked under "client confidentiality " clause.

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» PWC -Auditor's Competence

Posted by arunnsubramanian on 2009-01-09 10:06:49.367415+05:30
No one can accept any explnation from the auditors who conducted the audit for years in Sathyam. It is a grevious mistake and they did not conduct a real check on the financials, leaving many share holders to lose their hard earned money. The board members and the auditors should be banned for life and they should not be allowed to participate in any form in any organisation. They lack corporate governance and are not competent enough to point out mistakes and suggest correction. They have conducted themselves in an improper manner colluding with the Chairman

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» satyam and reliance in the waiting....

Posted by MS on 2009-01-09 02:51:05.892436+05:30
Satyam is the tip of the iceberg. In 2006 Japan was rocked by frauds where PWC audit partners deliberately allowed fudging. They were banned from audits until agencies brushed it under the carpets. ICAI should wake up and smell the coffee at Reliance group. Deloitte being another Big 4 auditing firm in India is signing off on the financials without challenging the basic accounting policies and assumptions / estimates used in preparation of the financials. The Reliance frauds will easily make Satyam look like David in front of Goliath of frauds.

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» PWC and more...

Posted by Mahadevan on 2009-01-09 02:49:05.391411+05:30
Satyam is the tip of the iceberg. When Enron was discovered it was the senior Anderson partners who fudged the books. In 2006 Japan was rocked by frauds where PWC audit partners deliberately allowed fudging. They were banned from audits until agencies brushed it under the carpets. ICAI should wake up and smell the coffee at Reliance group. They have been practicing fraudulent reporting since Dhirubhai's days and now the sons have continued this shoddy corporate governance. Its is amply supported by the Big 4 auditing firms in India signing off on the financials without challenging the basic accounting policies and assumptions / estimates used in preparation of the financials. The Reliance frauds will easily make Satyam look like David in front of Goliath of frauds. Any delay in investigating Reliance and other companies like Videocon etc can prolong the investor's agony and cause sudden death in near future.

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» Bank Confirmations

Posted by Shraddha on 2009-01-08 14:12:05.178217+05:30
I was working with PwC till last year and let me tell all the other super auditors giving statements to the media that YES! PwC has a very robust system of requesting for bank confirmations and I have complete confidance that they would have done so.Do you think a multinational organisation would be so silly as to not tally the bank balance with the confirmations, as some people have been quoted!! The idea reflects how silly the people making even such a suggestion are!!!!

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» PWC -Auditor's Competence

Posted by arunnsubramanian on 2009-01-09 10:19:48.081507+05:30
I pitty this reader. Do the auditors believe and accept any paper produced by the client?? Don't they verify the facts? Don't they analyse the financials and ask for proper evidence for any large variations and doubtful actions/ entries?? Don't you cross check for the geniuness of the documents produced? The incident points finger on PWC auditors that they have fallen a prey to the corporate's willful fraud and exposed themselves of their incompetency. They were carried away by the name of the client.

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» audit checks

Posted by S.T.Sawant on 2009-01-08 12:53:44.798609+05:30
The role of internal auditor needs to be checked.

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» Price Waterhouse competence

Posted by Eva Phoon on 2009-01-08 09:01:10.755828+05:30
nil

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» Price Waterhouse competence

Posted by Eva Phoon on 2009-01-08 08:59:36.616527+05:30
na

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» PwC

Posted by Venkat on 2009-01-09 09:42:23.072486+05:30
Even every "big 4" firms are doing such kind of things for their clients. The Main trust of the clients in these type of financial crisis is on their auditors, and its the duty of the auditors to give a feasible advice. So not only PwC but all other firms practice the same kind of strategy because for them "client satisfaction" is the first Thing.

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» Internal Audit

Posted by vipul on 2009-01-09 13:02:22.687407+05:30
what was the role of the internal auditors and the audit committee.

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