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.
Awhile back we told you about PricewaterhouseCoopers Global CEO Dennis Nally admitting that the PwC brand had been damaged because of the whole Satyam fraud.
DN has done another interview with the Indian press and he says despite this lit ng is on the up and up in India for PwC. The long/short of it is that Dennis & Co. are going to keep giving their clients the P. Dubs experience now and forever.
Pretty wide range of questions but we’ve presented the highlights for you.
Was the PwC Magic 8ball broken?
Q: When you look back at it do you think you could have avoided all that happened?
A: I don’t know if we could have avoided it. As we all know this was probably one of the most significant frauds that suddenly has taken place here in India but even in the global market place. So I do not know how you avoid that type of situation.
Where was the P. Dubs swagger when the shit hit the fan? Did you realize that everything was f’d and didn’t know what to do?
Q: [T]he firm didn’t seem to respond in a confident manner. The impression was that it didn’t know what it had been hit by. Do you think it could have been handled better?
A: I think with hindsight you can always do things better and that is part of learning and trying to deal with issues. But quite frankly this was a major event and of course it took us time to understand the pattern and what transpired.
In fact we are still learning and everybody is still learning. Now all the facts aren’t quite out yet but I think we are in the business of being out in the public and when something like this happens and it happens in a negative way, we are part of that. That is just a reality of being in a profession that we are involved with.
Why is this PwC’s fault?
Q: What role did the auditors have to play?
A: You are into an interesting debate and discussion because what is the role on a professional standards for the detection of a fraud. That is one of the areas that has been the focus not only on Satyam but a broader profession wide issue and we certainly welcome that debate.
I think there is an expectation out there in the public that auditors uncover every single fraud that they are involved with and that is not what professional standards call for but there is the public perception that that is what we are there to do. I define that as the expectation gap. If that is the expectation then we need to make sure that we are focused on the right kind of procedures, the right kind of standards, the right kind of reporting which is quite frankly really different than what we do today.
Will you stop all future frauds in India forever and ever and ever?
Q: Can you tell us if India will never see a Satyam again?
A: I wish I had a crystal ball but I don’t. As I said when you have a situation like Satyam or a major fraud I suspect somewhere in the world of corporate reporting, you are going to see another situation like that. Our job is to make sure we are doing everything we can possibly do consistent with the standards that are out there to ensure that we play our role in that process to avoid them.
The new India managing partner came from Singapore? You got something against Indians?
Q:But he has not come from India, you didn’t appoint him from the India firm – he was brought in from Singapore?
A: Gautam is originally from India which is great so it’s little bit of coming home programme.
Q: But it’s not a vote of confidence on the India management?
A: It is not. This is all about ensuring that we get the very best talent to focus on an important market like India and that’s exactly what we have done.
You let everyone down. Speak to them!
Q: A word to all those investors who felt disappointed with PriceWaterhouseCoopers for not alerting them to what was going on in Satyam. What is your message to them today?
A: Whenever we have situation like this, right or wrong, whatever standards are we are part of that and for that we regret what has happened. But this firm is about quality. It’s about doing the right things, it’s about being here for the investor community and we are very much focused on that.
Satyam fiasco has not dented credibility with clients: PwC [Money Control]