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| PricewaterhouseCoopers makes a new beginning, with caution |
| BS Reporters / New Delhi Dec 16, 2009, 00:37 IST |
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Vishesh Chandiok, the national managing partner of Grant Thornton India, now spends a lot of time while signing on new clients. He runs thorough background checks on any new company that comes to him – is the management too aggressive, what is its attitude towards financial reporting? Even old clients who want to renew the contract are put through the tests. “In the last one year, we have dropped 15 clients,” says Chandiok. “Some of them for this reason.”
The Satyam scam has changed for good auditors who went about their job in the country. The buzzword is the reputation risk associated with each assignment. Just the money involved is not good enough for an auditor today to go into business with a company. Auditors are a careful lot. Given that companies are always in a hurry to publish their audited accounts (Satyam’s annual report for 2007-08 was out within 20 days of the end of the financial year), a background check has become a necessity.
“This is the first time such a high-profile problem has happened. It has really shaken the credentials of professionals and they are gearing up internal control and peer review to turn auditing more foolproof,” BMR Advisors Partner Lav Goyal concurs, adding that the multi-tier review system is an option for the future.
The core issue that came up in the Satyam case was that the auditors, from PricewaterhouseCoopers (PwC), certified the non-existent bank accounts on the basis of documents furnished by the company. The certificates that the company gave to the auditors, it turned out, were fake and never issued by the banks concerned.
The rule book says the company has to send the letter to the banks seeking a statement of their accounts, and the answer is received directly by the auditors. Most auditors say they have begun following the norm now but there’s a long way to cover.
At PwC, which was in the eye of the storm, last week, Gautam Banerjee replaced Ramesh Rajan as chairman. The firm’s two partners who were the Satyam auditors, S Gopalakrishnan and Srinivas Talluri, are behind bars. In the last one year, PwC has appointed a new assurance leader, a new risk and quality leader, and a new management team at its Hyderabad office.
Besides making “significant investment in training to enhance audit quality”, PwC has also set up an independent advisory board which is headed by former cabinet secretary Naresh Chandra.
Institute of Chartered Accountants of India (ICAI) President Uttam Prakash Agarwal says there is no cause for panic: “Satyam will be considered as an isolated incident and will not change the perception towards auditing professionals.” Still, ICAI has sought basic data to understand the scale of operations of foreign auditing agencies such as PwC in the country.
Auditors are also awaiting the final draft of the Companies Bill, 2009, which will make fraud tougher.
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