Auditors face charges in Satyam fraud

Auditors caught up in India’s Satyam scandal have been charged with the
offence of luring investors to buy shares of the company by ‘knowingly
certifying forged and inflated balance sheets’.

The allegations against PricewaterhouseCoopers’ Subramani Gopalakrishnan and
Talluri Srinivas have been detailed in a written submission by the Central
Bureau of Investigation (CBI) of India, made to the High Court in the state of
Andhra Pradesh. The law enforcement body is opposing a bail application made for
the accused.

Maintaining their innocence from Hyderabad’s 19th century Chanchalguda jail,
where they have been held for the last five months, Gopalakrishnan and Srinivas
have tried seven times in the lower court to get bail before approaching the
High Court earlier this week. They have called themselves scapegoats for an
entire system that failed to catch years of wrongdoing at Satyam Computer
Services Ltd.

However, according to CBI, the Satyam affair was a rarest of rare case where
a gigantic fraud was perpetrated by the management with active connivance of the
statutory auditors of the company.

Citing evidence linking one of the accused to the fraud, the agency has told
the court that a whistleblower’s e-mail to one of the independent directors of
Satyam was forwarded to Gopalakrishnan, but the latter rejected its contents.

The CBI also told the court that the evidence of diversion and
misappropriation of Satyam funds through foreign bank accounts has come to
light, and the agency has sought the help of Interpol to identify the end use of
these funds. The agency said that its multidisciplinary investigation team is
now engaged in scrutinising the receipts of money coming from abroad.

The two partners have been suspended from work by Price Waterhouse India (the
company’s name in India) and have continued to receive support from the firm
during court proceedings.

Meanwhile, any bad publicity associated with the Satyam affair does not
appear to have dented PwC’s reputation. It has announced that it will be
increasing its staff by 50% in India.

A spokesperson for the firm in Mumbai told Accountancy Age: ‘PwC in India has
been growing very strongly for the last few years, both organically and by
strategic alliances’. Calling India ‘a very important strategic market for the
PwC network’, and coupled with a strong growth in the Indian economy, he added
that the ‘staff strength in India could increase to over 10,000 (from the
present 6,500) in three to four years.’

PwC is looking forward to the introduction of IFRS in India, which it said
will offer further opportunities to the accounting profession. ‘The recent
announcement of a partial sale of state-owned industries and the government’s
plan to encourage overseas companies to have secondary listings in India are
both excellent opportunities for the profession as these programmes will require
the support of quality audit firms,’ said the spokesman.

This expansion plan follows PwC’s formation of a four-member advisory board
mainly comprising of retired Indian civil servants. Earlier this week in New
Delhi, the board members were visited by Dennis M Nally, chairman designate of
PricewaterhouseCoopers International.

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