PwC failed to follow its own auditing tips

Font Size

Print

Feedback

Email

Discuss

Related Articles

Google OS can start PC in 7 secondsGovt may help Satyam raise financingMegasoft: no material impactIT caught in slowdown web

New Delhi: willingness to challenge and fully participate in the committee’s activities.

In Satyam’s case it was ensured that the audit committee is headed by a person like M Rammohan Rao, dean of Indian School of Business and other independent directors, and not B Ramalinga Raju or his brother Rama Raju.

However, the internal auditing team comprising professional accountants and external auditing committee, despite having quality experience, failed to detect the mess, as Raju’s letter would have us believe. It is to be noted that according to analysts, a company receives confirmations for each debtor declared by the company.

Raju’s letter would also have one to infer that there was a minimal interaction between members of the audit committee. Also that none of them had the basic information of bank accounts and company records. B Sai Chandravadhan of Chess Management Services Pvt Ltd said, “The Satyam fiasco could have been prevented by tallying company records with bank records and by taking independent directors into confidence”. The PwC whitepaper recommends formation of disclosure committee (including senior executives) by the management. It hence assures everything that has been considered for disclosure has indeed been considered objectively.

From the PwC Fraud Report know your enemy

The most commonly used terms:

• Fraudulent financial reporting—includes deliberate accounting misstatements, manipulation in accounts, showing fictitious transactions and records, and/or inaccurate or incomplete disclosures done with the intention of misleading users of the accounts

• Asset misappropriation—includes theft of cash, securities, inventory or fixed assets, circumvention of company controls and procedures (eg procurement and payroll fraud), theft of business secrets or other intellectual property, diversion of revenues, asset stripping and other breaches of fiduciary duty

• Unauthorised receipts and expenditures—an umbrella term for engaging in corrupt business practices to influence the awarding of business opportunities, or subverting government objectives

• Disclosure fraud—intentionally providing inaccurate or incomplete information, not just limited to the financial statements in order to paint a false picture