Disclosure is shocking, say other auditors

Auditors and lawyers today criticised the role of Satyam Computer auditor Price Waterhouse for its failure in detecting the fudged accounts of India’s fourth-biggest software maker and demanded a thorough inquiry. Price Waterhouse was also among the auditors of the failed Global Trust Bank.

"I am shocked, it is just incredible,’’ said Shailesh Haribhakti, managing partner of accounting firm Haribhakti & Co. "We need a coordinated investigation to bring the truth out.’’ Satyam Founder and Chairman Ramalinga Raju today admitted to falsifying earnings and assets and announced his resignation taking responsibility. "Even a rookie auditor could have checked with the bank to find out the correct balances,’’ Nawshir Mirza, a former auditor with Ernst & Young, and an independent director on the board of Tata Power and other Tata group companies said.

Price Waterhouse declined to comment on the Satyam founder’s disclosure.

What surprised many was Raju’s claim of single-handedly falsifying the company’s balance sheet. A company’s balance sheet apart from being signed by the auditor, chairman and managing director is also initialled by the company’s chief financial officer and head of accounts. That apart, the audit committee, comprising of three or more independent directors, is also responsible for ensuring integrity of the company's financial statements, performance of the company's internal audit function and compliance with legal and regulatory requirements. The committee meets at least four times a year, with authority to convene additional meetings as circumstances require.

MP Chitale, a chartered accountant and an independent director on board of several firms, while terming the development as "frightening’’ and "mind numbing’’ charged that "this magnitude of falsification cannot be perpetrated by one person.’’

Another global audit firm Ernst & Young’s partner Dolphy D’Souza while speaking to a television channel said the auditors will need to be questioned and the matter could not be wished away. Referring to shaken confidence of investors he said there would be huge implications from overseas regulators. Satyam stock is also listed overseas.