PwC audit in spotlight after $1bn fraud at Indian outsourcer
Accounting fraud by Satyam chairman is being called 'India's Enron'.
PricewaterhouseCoopers has said it will cooperate fully with regualtors after
a $1bn accounting fraud was uncovered at its audit client Satyam Computer
Services, one of India’s largest offshore outsourcers.
The chairman of Satyam, Ramalinga Raju, one of India’s largest outsourcing
providers, has resigned after admitting to inflating profits by about $1bn
(£682m) over a number of years.
The fraud, which has been described as ‘India’s Enron’, has rocked the
country’s outsourcing industry.
In a statement, Pricewaterhouse India said: ‘The audits [of Satyam] were
conducted by Price Waterhouse in accordance with applicable auditing standards
and were supported by appropriate audit evidence.’
‘Given our obligations for client confidentiality, it is not possible for us
to comment upon the alleged irregularities. Price Waterhouse will fully meet its
obligations to cooperate with the regulators and others.’
The offshore outsourcing market has boomed over the past ten years as large
Western companies have outsourced IT, administrative and other back office
functions, to countries including India, Egypt and Russia, where salaries for
skilled labour are much lower.
Analysts reckon that the Satyam fraud is likely to cause increased scrutiny
of Indian companies and may affect investment in offshore outsourcing.
Satyam’s share price collapsed by more than 60% after its fraud emerged, and
reports claimed that Merrill Lynch has terminated its contract with the company.
In a letter addressed to the Satyam board, Raju described his ‘deep regret’
and the ‘tremendous burden’ he carried on his conscience. ‘It was like riding a
tiger, not knowing how to get off without being eaten,’ he said.
Satyam
chairman admits to £682m fraud