The head of the Institute of Chartered Accountants in India seems to feel as though 2009’s massive Satyam failure was not, in fact, a failure of the auditors but levels before the auditors and then the auditors. “There were promoter shareholders, executive directors and directors, and the auditors were the last rung. On the other side, there were independent directors, one of whom was a dean of the Indian School of Business, but nobody questions the role of independent directors.”
Amarjit Chopra feels corporate governance (or should that be complete lack of…) is to blame, not the PwC auditors who somehow missed the following:
• $1.09 billion in artificially inflated cash and bank balances (psst, baby auditors, that’s called a material amount)
• $81.59 million in accrued interest that was accrued out of thin air and never existed
• An understated liability of $266.91 million
• An overstated debtors’ position of $575.27 million that was more like $106.33 million (oops)
Maybe PwC should have waited for Chopra’s comments. Had they done so, they wouldn’t have already come out and admitted they missed a few issues on the September 30, 2008 Satyam balance sheet:
The former [Satyam] chairman has stated that the financial statements of the company have been inaccurate for successive years. The contents of the said letter, even if partially accurate, may have a material effect (which is currently unknown and cannot be quantified without thorough investigations) on the veracity of the company’s financial statements presented to us during the audit period. Consequently, our opinions on the financial statements may be rendered inaccurate and unreliable.
So if that’s the case, someone remind me why we even have auditors then? Sure financial statements belong to management but aren’t auditors there to give everything a good once-over to ensure giant fraud is not staring them directly between the eyes? You’d think at least one of those brilliant Indian first years would have realized that cash was a tad high once they started doing the work.