India Bans PricewaterhouseCoopers From Auditing Listed Firms for Two Years [WSJ] The Securities and Exchange […]
An addendum to the Bloomberg article on the Satyam executives' sentencing we linked to earlier: […]
Remember Satyam? That Satyam? Yeah, it's been awhile for us, too. Satyam's PwC India auditors […]
The Indian Express: The chapter of Satyam scam is finally set to close as far […]
The Indian Enron fuckshow otherwise known as Satyam has seemingly been in our lives since […]
The affiliates – Lovelock & Lewes, Price Waterhouse Bangalore, Price Waterhouse & Co. Bangalore, Price Waterhouse Calcutta, and Price Waterhouse & Co. Calcutta – must pay $6 million to the SEC, $1.5 million to the PCAOB and are barred from accepting U.S.-based clients for six months. The SEC fine is the largest ever levied against a foreign-based accounting firm in an SEC Enforcement Action and the PCAOB fine is the largest in the regulator’s history. PW India must also “establish training programs for its officers and employees on securities laws and accounting principles; institute new pre-opinion review controls; revise its audit policies and procedures; and appoint an independent monitor to ensure these measures are implemented.” The SEC’s press releas ilures “were not limited to Satyam, but rather indicative of a much larger quality control failure throughout PW India.”
More from Bob Khuzami & Co.:
“PW India violated its most fundamental duty as a public watchdog by failing to comply with some of the most elementary auditing standards and procedures in conducting the Sataym audits. The result of this failure was very harmful to Satyam shareholders, employees and vendors,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Cheryl Scarboro, Chief of the SEC’s Foreign Corrupt Practices Act Unit, added, “PW India failed to conduct even the most fundamental audit procedures. Audit firms worldwide must take seriously their critical gate-keeping duties whenever they perform audit engagements for SEC-registered issuers and their affiliates, and conduct proper audits that exercise professional skepticism and care.”
For the PCAOB, Chairman James Doty:
“The reliability of global capital markets depends on auditors fulfilling their obligation to investors to perform robust audits, resulting in well-founded audit reports. Two of the PW India firms, PW Bangalore and Lovelock, repeatedly violated PCAOB rules and standards in conducting the Satyam audits. These confirmation deficiencies contributed directly to the auditors’ failure to uncover the Satyam fraud.”
And Claudisu Modesti, the Director of Enforcement:
“Accounting firms that audit U.S. issuers, including affiliates of international accounting networks, provide an essential bulwark for investors against issuer clients that are committing fraud. PW Bangalore and Lovelock repeatedly failed to meet their obligation to comply with PCAOB standards, and these failures contributed to PW Bangalore and Lovelock failing to detect the fraud committed by Satyam management.”
You can see both the enforcement actions on the following pages. As for the firm, here’s a portion from PW India’s statement:
The SEC and PCAOB orders found that PW India’s audits of Satyam did not meet US professional standards and, as a result, did not discover the fraud underlying Satyam’s 2005-2008 financial statements. The orders make clear that Satyam management engaged in a years-long fraud, going so far as to create scores of fictitious documents for the purpose of misleading the auditors.
These settlements, in which PW India neither admits nor denies the U.S. regulators’ findings, apply only to the U.S. regulatory enquiries into Satyam. Neither of the orders found that PW India or any of its professionals engaged in any intentional wrongdoing or was otherwise involved in the fraud perpetrated by Satyam management. The settlements mark the end of the Satyam-related U.S. regulatory enquiries concerning PW India and are a positive step and important milestone in putting the Satyam issue behind PW India. PW India remains hopeful of resolving the outstanding enquiry with the Indian market regulator.
Sounds a little defensive, doesn’t it? Here’s what PwC International Ltd. had to say:
PricewaterhouseCoopers International fully supports PW India’s decision to resolve these issues with the US regulators and is hopeful that an agreed resolution will also be reached with the Indian market regulator. The PwC network will continue to work closely with PW India as it fulfils its commitments to its regulators, its clients, and to the Indian and global marketplaces.
PricewaterhouseCoopers International is committed to a PwC presence in the vibrant and fast growing Indian marketplace.
“India is a key market for PwC and we are committed to working with our colleagues in India to build on a successful practice with quality at the centre of everything it does,” said Dennis Nally, Chairman of PricewaterhouseCoopers International. “The last two years have been challenging for PW India but I believe that PW India has learned the lessons of Satyam, made the right changes and is on a sound footing to move forward, dedicated to quality work.”
This may be a foreign firm but it makes us wonder if the SEC and PCAOB are just getting warmed up. Mr Doty and SEC Chief Accountant James Kroeker will be on the tomorrow’s panel that we will be live-blogging and it will be interesting to hear what they have to say.
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.
Release of Satyam Founder Ensures That No Progress Will Be Made in the Investigation for the Foreseeable Future
We’re getting used to this.
Chances of a speedy resolution to l’affaire Satyam receded on Wednesday with the Andhra Pradesh high court granting bail to the company’s founder and former chairman, B. Ramalinga Raju, freeing, albeit temporarily, the last of the accused in a corporate fraud that came to light in early 2009 with Raju’s confession and whose magnitude has since doubled to a claimed `14,000 crore.
Raju’s release is a setback for India’s federal investigating agency, the Central Bureau of Investigation (CBI), which is yet to produce him in court in person. Arrested on 9 January 2009, Raju has been undergoing treatment for Hepatitis C at Nizam’s Institute of Medical Sciences, Hyderabad.
On 16 August, he retracted his confession in the trial court by responding in the negative to questions posed by the court about the fraud. The burden of proof for Raju’s fraud now rests with CBI. And now, he is out on bail—for two sureties of `20 lakh each.
India’s minister for corporate affairs Salman Khursheed insisted that Raju’s release would not “hamper the ongoing investigation”.
Satyam case weakens with Raju’s release [Live Mint]
Accounting News Roundup: Tweedie’s Final Months; Lease Accounting Proposal Coming Soon; UCF Accounting Student’s Body Found | 08.16.10
Goldman CFO Viniar Gets $4.5 Million Options Windfall [Dow Jones]
“Goldman Sachs Group (GS) Chief Financial Officer David Viniar received $4.5 million by exercising more than 67,000 options as part of the investment bank’s disclosure Friday with the Securities and Exchange Commission.
According to the filing, Viniar was among six top executives who have converted s ing stock options into a windfall of $24 million, cashing in on benefits they received years before the government’s 2008 rescue of the nation’s biggest financial firms.”
Tweedie faces greatest challenge in last days [FT]
“Sir David Tweedie says his staff are concerned about what he might do in his last months as head of the International Accounting Standards Board, the powerful global rule setter that he has chaired for a decade.
‘I think people are quite worried about how I might do in my last six months here, with all my vendettas and all these grudges I’ve been storing up . . . I think they are worried that I might let them go,’ he says with a laugh.”
Rulemakers Plan Global Overhaul of Lease Accounting [Reuters]
“U.S. and international accounting rule makers are planning to propose an overhaul of lease accounting as soon as Tuesday, in a move expected to affect some $1.2 trillion in leased assets.
Traditionally, accounting rules have given companies a lot of leeway in how they record leases for assets ranging from store locations and restaurant equipment to airplanes and machinery. As a result, only certain types of leases appear on the balance sheet, while a majority of a company’s leases can often be kept off the balance sheet and hidden from an investors’ view.
But the Financial Accounting Standards Board, which sets U.S. accounting rules, and the London-based International Accounting Standards Board, which writes accounting rules for more than 100 countries, will aim to change all that this week by proposing to bring many of these assets onto corporate balance sheets.
‘It’s something that needs to be done,’ said John Hepp, a partner in accounting firm Grant Thornton’s professional standards group. ‘Lease accounting is broken.’ “
Hunt for IASB head hits hurdle [FT]
“The search for a successor to Sir David Tweedie, chairman of the International Accounting Standards Board, which sets accounting rules for most of the world outside the US, has hit difficulty in the face of opposition in Europe to how the process has been conducted.
Sir David has presided over deteriorating relations since the financial crisis, with some senior European officials raising concerns about the transparency of his decision-making amid criticism that he has prioritised an effort to get the US to adopt international rules at the expense of European interests.”
PricewaterhouseCoopers taps Kevin Kelly to head Birmingham office [Birmingham News]
Kevin Kelly is new the managing partner for PwC’s Birmingham office. He replaces David Pickett who is the new OMP in Nashville.
UCF accounting student killed [Central Florida Future]
“Orange County Sheriff’s officials have released the names of the two people who died Saturday in an apparent murder-suicide, after a woman was found dead in an apartment about five miles south of UCF, and a man was found dead at a local shooting range.
Jennifer Lynn Roqueta, an accounting major at UCF who had just turned 21 in May and a server at Buffalo Wild Wings in Waterford Lakes, was identified as the victim on Sunday.
The suspect, who was identified as Ryan Ray Scurlock, 24, was found at the Shooting Gallery gun range located at 2911 39th St. in Orlando.
The investigation stems from Saturday’s incident in which the OCSO received several calls from Scurlock’s acquaintances requesting they check on his well-being because they had received alarming text messages from him that indicated he was distraught.”
Former Fed official joins KPMG [WaPo]
Jon Greenlee is joining the Tyson’s Corner office as a managing director in KPMG’s financial services regulatory practice. He previously worked as an associate director of risk management in the Fed’s division of banking supervision and regulation.
Satyam auditors to face Sebi probe [Hindustan Times]
“Accounting firm PricewaterhouseCoopers (PwC) will have to face an inquiry by the Securities and Exchange Board of India (Sebi). The Bombay High Court on Friday dismissed PwC’s petition challenging Sebi’s show-cause notice dated June 30, 2009 seeking to prohibit PWC from auditing accounts of listed companies.”
That’s not a tax bill, THIS is a tax bill: Crocodile Dundee star Paul Hogan hit with £8m in charges [Daily Mail]
“But in a American TV interview last year, Hogan, 70, vowed that the taxman would not get a penny more of his money and added: ‘Come and get me, you miserable b******s.’ “
Eide Bailly merges with R T Higgins [Denver Business Journal]
Top 25 firm Eide Bailly’s merger with RT Higgins brings the the firm’s total staff to over 1,200 in nine states.
Back in June we told you about Satyam requesting just a wee bit more time to nail down their restatement of their financial statements. It wasn’t because KPMG and Deloitte weren’t working their asses off, it was more of commitment to get things right. Putting good numbers out there, repairing broken trust, so on and so forth.
Well! The three month extension ends next month but as you might expect, there’s a bit of a problem. More specifically, KPMG is now saying that they haven’t received the documentation necessary to finish the job. Unless everyone is okay with some wild-ass guesses, in which case they can proceed.
[F]or all its documents, KPMG had to depend on the [Central Bureau of Investigation (“CBI”), which is investigating the scam.
NDTV has learnt that KPMG’s analysis of the documents don’t match with the CBI’s. There is a discrepancy between the two which amounts to over [$200 million].
CBI has based its calculations on estimates of Satyam’s assets and liabilities while KPMG says they need documentation to base their estimates.
KPMG says that they didn’t get all the documents needed to make a clear assessment which is why the accounts are likely to be re-stated full of riders.
But again, if you’re cool with some double-entry hocus-pocus, that can be arranged. There’s a merger at stake after all, “This confusion in the numbers could hold up Satyam’s merger with Tech Mahindra, which needs the go ahead from market regulators in India and the US, since Satyam is also listed in the US.”
Good luck getting that U.S. approval.
With just a couple weeks until the June 30 deadline for the company to issue its restated financial statements, Satyam is requesting just a little more time to get this mulligan nailed down. Three months to be precise.
Yes, they’re completely aware that it’s been nearly 18 months since the shit hit the fan. And yes, this is the third time they’ve asked India’s Company Law Board (“CLB”) for an extension on the filing but at this point they figure expectations are so low, no one will get too worked up over it.
Except for an “analyst with a leading brokerage house.” who is quoted in the Business Times, “There is no clarity on what is happening within the company. They should have at least provided the current sales figure or the bench strength. How is the shareholder supposed to rate their stock?”
Since more than a few people might be caught up in “sales figures” and whatnot, Satyam went to the trouble to let everyone know that they’re working hard, ordering in, etc. etc. so you can rest your pretty little heads:
A Satyam official said, “The records have been under the custody of investigating agencies and we recently got a court clearance. Also, our auditors (KMPG and Deloitte) told us they need some more time for the restatement. It’s only a matter of a quarter.”
See? It’s just a matter of a quarter. Plus, you can’t really blame them – KPMG and Deloitte are the ones saying they need more time. Satyam has likely been bugging them for months about wrapping up but KPMG and Deloitte are probably complaining, saying things like, “we can’t find any documentation to supports these numbers” and “this doesn’t add up.”
So, TFB if some whiny analysts don’t like it. We’ll just find out just how big of nightmare these financial statements will be in due course.
You don’t need to tell Jim Quigley that it’s only a matter of time before Deloitte is the largest accounting firm ON EARTH.
In a Q&A with India’s Business Standard, Quigs was asked about the shrinking gap and you better believe the man is all over it like a hard-hitting interview at Davos: