Sathyam shareholders have paid their price for appointing one of the Big 4, Price Waterhouse Coopers, Chartered Accountants, as their statutory auditors. But the price seems to be very high considering the fact that the accounting fraud by Sathyam involves nearly Rs.7,000/- Crores.
It is to be remembered that the same auditing firm is involved in Global Trust Bank case and the matter is still pending before the Institute of Chartered Accountants of India which is yet to take a firm action against the firm. It is to be noted here that one of the PARTNERS of the firm is on the CENTRAL COUNCIL of the Institute. One wonders whether this could be the reason for inaction by ICAI.
Anything connected with Truth (Sathyam) and Trust (Global Trust Bank) this firm has made its indelible mark in not taking due professional care and diligence.
It is fundamental of auditing to verify Bank balances and reconciliation thereof. One cannot accept the statement of this firm that “the audits were conducted in accordance with applicable auditing standards and were supported by appropriate audit evidence”. Sathyam Chairman has gone on record that the accounting manipulations have been going on for several years.
Does this expose the firm’s lack of professional skill in auditing? Does it mean the firm has acted in collusion with the Chairman of Sathyam? ( Chairman has given clean chits to Tom, Dick and Harry of the Company). More than actual perpetrator of fraud the person who helped the fraud to take place is to be punished severely.
When lot of fraud took place abroad and many auditing firms faced court cases several Accounting Institutes all over the world changed the format of reporting by suitably wording the audit report in such a way to have an escape route from the clutches of law. Unfortunately this also happened in India. Audit Report format shall be changed by the Department of Company Affairs in such a way that auditors take full responsibility of what is stated in the accounts and report. They shall not be allowed to escape by saying what they did was not auditing but only test checking.
Test examination is no examination. Auditor shall perform his duty in full and he should not be allowed to escape by saying that he did only test checking. While Raju brothers and CFO of Sathyam have been arrested, auditors have been let scot free. More than the directors it is auditors, whose reports are relied upon by the shareholders, bankers, suppliers and other investors and stakeholders, who shall be interrogated by the Police and regulatory authorities. They shall be arrested forthwith as they stood by the side of Ramalinga Raju for the past several years fudging accounts and issuing false certificates. These foreign auditing firms shall be banned in India.
For the past few years there have been reduction of faith on auditing profession. It is high time that the Institute of Chartered Accountants of India take a very strong step against the auditing firm which certified the fudged accounts of Sathyam and its group companies. Action shall be taken against the firm as a whole without making any individuals scape goats.
Government’s move to change the entire Board of Sathyam is welcome. Induction of Deepak Parekh, Chairman of HDFC, in to the Board of Sathyam is yet another welcome measure.
Let us hope the new Board with the help of the Government save the families of 53,000 strong employees and also the name of the Indian Corporate Sector.
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