AUDITORS PRICE WATERHOUSE : Will Surely Pay the PRICE as there is not enough WATER to douse the SATYAM FLAMES that are engulfing their HOUSE !

Within just one day of Satyam’s Promoter Chairman,Ramalinga Raju confessing to cooking up the Books, in his letter to the Board,the Auditing House and one of the ‘Big Four’,PRICE WATERHOUSE is already being relegated to history for their role in this unfolding and sordid Satyam Saga…remember how the Auditing Giant,Arther Anderson wound up when Enron failed !?

Price Waterhouse audits over 100 listed Indian companies like the Auto Giants Maruti and even the huge HCL Group in the Software Sector…so it’s not that they don’t have any experience of auditing software majors…..So their obvious lapses when auditing Satyam was a huge shocker

I remember that in 2007, when I was at a High Profile Corporate Governance Seminar in Mumbai where the dignitaries were Heads of Exchanges and Government Ministries and Leading Corporate and Auditing Houses from all over India,there was a very ‘show offy’ lady from Price Waterhouse whose presentation revolved around their specially developed software of a Corporate Governance System that clould be implemented by Corporates….When the Chief Secretary of the Orissa Government,one Mr Patnaik,asked her how much would this Software and Implementation Cost and could it be applied to PSU and Government Set Ups,this lady had the bloody cheek and arrogance to state ” You probably would not be able to afford it !…It would cost over Rs One Crore “….There was a shocked and studied silence for a few moments on her brazenness…When I was asked to address the audience I commented on this sort of arrogant and snobbish mindset by professionals..She was just one of a Tribe, that sadly has many members,who have inflated egos and inflated opinions of themselves and their firm and status….I daresay it’s a contagious American Banking and Corporate Trait…but look where it’s landed America and it’s once major Powerhouse Icons !

Auditors are appointed by Shareholders at the AGM to ensure Independent Review and Audit of the Financial Books and Assets…but for all purposes their Independence is severely compromised as they have to interact with Management and Promoters to solicit increase in Fees and potential other Business like Certification,Tax and Conultancy work in Mergers and Acquisition and Valuation Situations….even though the ICAI and the Companies Act has directives that should be followed and practises so as to not create any Conflict of Interest in Auditors,these firms find a way out by routing business other than audit to other front or related and friendly firms…as this is widely practised by most firms in this competitive era,the ICAI is not a very strict enforcer of directives and guidelines….this strengthens and makes for a compelling case for the government to intervene and set up a seperate legal body to conduct Audits or create a Regulatory Body for Auditors.In fact the New Amendments to the Companies Act will involve stricter and more stringent compliance by Auditors and Directors

Auditor Teams that are assigned to specific audit jobs are often overawed by the scale and stature of the Company and it’s Promoters and Management…they fear in raising ackward questions and are also often too junior to realise implications of many accounting entries and operating circumstances and even boardroom decisions….It’s not very difficult to pull Wool over their Eyes !

I remember,when I had just joined in the early Eighties,the prestigious auditing firm of S B Billimoria & Co ( Now part of the Deloitte Group),I was assigned to a Wadia (Bombay Dyeing) Group Company audit…the CFO had some weird,prejudiced and biased opinion of Auditors and held a very convoluted View that Auditors were Employees of the Company !…maybe he was just being Practical !   

Rather than rejoicing at the fate of Price Waterhouse I am saddened for a lot of hardworking top professionals in this firm,many of whom I know personally…they will pay the price of their Hyderabad Partner,Srinivas Talluri,who was responsible for the Audit of Satyam and signed the Annual Report

That over 80% of the Satyam Assets of over Rs 8000 crs on the books as on September 30,2008 simply do not exist and the fact that this escaped the attention of Price Waterhouse makes me wonder what sort of Defence will this Firm have to explain all of this ! 

The way I see it is that PRICE WATERHOUSE will pay the PRICE as taps are running dry fast and there is simply not enough WATER to douse the Satyam Flames that have engulfed it’s HOUSE  

5 thoughts on “AUDITORS PRICE WATERHOUSE : Will Surely Pay the PRICE as there is not enough WATER to douse the SATYAM FLAMES that are engulfing their HOUSE !

  1. Gaurav…I don’t think you should be talking about individuals (in this case, Srinivas Talluri) in this light without having a shred of evidence to support what you are saying. Just like you know a lot of them in PwC personally, I can tell you that I know a lot of them too and whats more, I know Mr. Srinivas very well too and refuse to believe that he could have been involved in a fraud of thsi magnitude. I know the work ethics that he follows and would reserve judgement on this until the investigation is complete.
    I have a feeling that the “show-offy” lady from the seminar you had attended has left a deep impression on you about PwC and the people working in there. I am sure once the evidence comes to light, we will have enough time to dissect it and pass judgements but till then, please do not indulge in this rumour spreading. I do agree with you that this should not have escaped the auditors but to me Mr. Raju’s confessions and the kinds of things that he is admitting to have done are almost school boyish and high school kids would have caught that. I sincerely believe there is something bigger coming and request you to please wait till then and not jump the gun

  2. Hi Kaushik,

    Welcome your response…can sense your deep anguish too and I completely am in sync with you to await the conclusion of investigations

    I have never accused the Price Waterhouse Partner, Mr Srinivas Talluri of colluding in this Fraud with Ramalinga Raju

    As far as your contention that I should not be talking about Mr Talluri without having any shred of evidence to support,I would disagree….Here we have the Promoter and Chairman of Satyam,Ramalinga Raju,virtually sealing his fate by confessing and disclosing and revealing yesterday that he has been cooking up Satyam Figures for years and there is a huge Hole of Thousands of Crores in the Assets…most in Cash and Bank Balances !…Is this not Sufficient Evidence that the Auditors,Price Waterhouse has failed to discover and spot this !? In this context,the Signing Partner,Mr Srinivas Talluri,of Price Waterhouse must take responsibility…I’m sure he is living out the worst nightmare of his life

    As I have stated in the Blog I wonder what Defence will they have to explain how this Hole of such stupendous Magnitude escaped them !…was this Bank and Cash Hole of over Rs 5000 crs camouflaged by Satyam through Round Tripping or forged Bank Ceritficates of Balance to get around Auditors?..I really don’t know

    As far as your belief that something bigger is coming !..Phew !…Perhaps a confession and disclosure of such magnitude could be heralding some more in the offing !…I’m sure Mahesh Bhat will come out with a Potboiler Movie within six months based on this Satyam Saga !

  3. Dear Gaurav,

    First of all congrat for writing such a sharp comment abt PWC. I am also a CA of 1983 bactch having worked with S.B. Billimoria & Co, Bombay during 1983/1984. I was working with Mr Nalin M. Shah, Idont know we ever met . However I am with you that without a gross negligence/ collusion with the auditors , this sort of fraud , such a huge fraud could not be commited. In this case PWC can’t escape just by saying that they believed management statements.

  4. Hi Gaurav,

    I totally agree with Mr. kaushik when he says that you should not be spreading rumors just based on Mr. Raju’s boyish confession.

    As you yourself are very familiar with accounting and auditing there are a few things I would have expected a person of your calibre to think of before beleiving Raju’s confession:

    a. The banks accrue Interest on a fixed deposit every month and the moment the Interest amount crosses Rs. 5,000 they start deducting tax at source.

    Now lets suppose the FD was supposed to mature only after fice years. Still TDS is deducted on the accrued interest and a Form 16 is provided by the bank to the company for filing with the IT return of that year.

    If you beleive for a moment that the company never had so much of FD balance with them, then were they showing the corresponding interest income or not? If not, what was the IT department doing? If yes, then they had form 16s with them which they were submitting to the IT department. What was the IT department doing then.

    Before giving a biased and an immature opinion on the ethics of a person and a profession you dont seem to know anything about, I suggest you think about all the regulatory bodies that are involved in approving the sales, foreign inward remmitances and taxes of the Company.

    It is just not enough for the auditor to be involved.

  5. Ouch !…Seems to have touched a raw and sensitive nerve with you Shraddha !

    Respect your strong views

    This particular blog is over a month old…a lot of water has flown since then…a lot more is expected….Many Investigation authorities are already involved….what really happened and how did it happen is yet to unfold in it’s entirety…It will also reveal if this fraud could have been detected earlier by an external body dealing with some aspect of Satyam’s operations…be it the Income Tax Authorities or the Exchange Control Authorities or any other…. let’s await this…

    I’m sure you must have gone thorugh all the Satyam Blogs on my Blog…they are in the category “Satyam: The Sordid Satyam Saga”..especially where PWC has issued a statement later requesting that the Satyam Accounts for the last many years should not be relied on

    As for your strong opinion of my opinion being biased and immature and that I know nothing of Auditing and a person of my calibre should think before believing Raju’s Confession….If you read all my blogs,I’m sure you’ll get a sense that I may hold strong views but let me assure you,I hold no Bias and I don’t spread Rumours !..I personally have nothing against PWC or it’s partners and employees…I sincerely hope they do come out of this nightmare….maybe the Blog Title was a bit to Strong

    It’s also not a question of Believing or Not Believing any longer…a Pandora Box has been opened by Raju’s confession…the implications and consequences are far reaching and yet unfolding

    I’m expressing my views in this Sordid Satyam drama as I find it difficult to remain a silent spectator

    You are free to disagree with my views

    Thanks for the Response and please do keep doing so..even for Blogs other than related to Satyam

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