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| ICAI tells members to rely on external info |
| BS Reporters / Hyderabad/Mumbai Apr 07, 2009, 00:14 IST |
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Post the Satyam scam, the Institute of Chartered Accountants of India (ICAI) is cautioning its members “to be much more vigilant and rely on external information than be dependent on what the management provides”.
Two of the statutory auditors of the IT firm are in jail, along with the two chiefs of Satyam’s finance department.
“In the case of Satyam, the management inflated sales receipts and doubled the figures. The company had 600 clients; in some cases, sales figures were doubled. The company would show the money it received, but it was never realised. For many years, the money was kept in the current account. When in 2006, two analysts asked why despite having a good cash and bank balance was it looking at raising funds, the management decided to move to show fixed assets. They were confident that this would make the auditors comfortable too. Besides, the company created false FDR receipts,” Uttam Prakash Agarwal, president, ICAI, told journalists here.
Agarwal averred that the entire Satyam fiasco started as a minor adjustment in the balance sheet five-six years earlier. “The amount (falsified), when started, was as low as Rs 10 crore, which went on growing year on year,” he said.
In an earlier statement, Agarwal had said there was no ready evidence that the jailed Price Waterhouse (PW) auditors in the scandal had also colluded. After the interrogation of CFO Vadlamani Srinivas, and the CAs, Gopalakrishnan and Srinivas Talluri, the CFO admitted his role in aiding Chairman B Ramalinga Raju and MD Rama Raju in fudging and falsifying the accounts. Vadlamani was candid enough, said Agarwal, to admit that he, along with G Ramakrishna, the vice-president and a cost accountant by training, were actively involved in the scam.
According to Vadlamani, another team which directly reported to the CMD — led by G Ramakrishna — executed the plan by fabricating and preparing false documents such as sales invoices, bank statements, bank confirmations, etc, by involving a team of around 10 junior staff. Vadlamani also said he had resisted the attempts of the management but could not do much in view of their “master-servant” relationship.
On the back of the Satyam episode, the ICAI is planning to seek more power for chartered accountants (CAs) so that they are not mere qualifiers. In case they see any divergence in the numbers provided by the company, there must be a way to compel a restatement of accounts, according to the ICAI.
"As of now, the role of a CA is to give opinion on the financial statement that is prepared by the management and check if it follows the norms. There are thousands of cases where CAs have reported such incidents but no action has been taken against the company. Even in the Satyam case, if the CA would have complained, nothing would have happened,” said Agarwal.
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