The Satyam fiasco has called into question the sanctity of its auditors. Although its still early days to speculate whether
Satyams auditors were party to the fraud or merely failed to perform their duties, it is beyond doubt that the whole incident threatens to paint the fraternity of auditors and chartered accountants
with a black brush.
On the issue, an ICAI council member, who declined to be named said: As auditors, we definitely have a role to play. This incident gives the entire CA fraternity a bad name. If we unravel any wrong doings on the part of the auditors, the institute will initiate action against the concerned auditor. KPMG head of markets Pradip Kanakia said: Audit professionals globally were just about recovering from the scam in the US and Europe. Now, auditors role will be questioned in India too. If negligence on the auditors part is proved, there will be huge dent on the confidence on auditors in general. Although, PwC is our competitor, this is not the time to rejoice.
Mr Kanakia felt that given the magnitude and complexity of the fraud, role of everybody concerned would be questioned. This needs deep investigation and it would require months to unravel the whole story. Mr AK Doshi, partner of Doshi, Chatterjee, Bagri & Co, also observed that it was a collective failure of the Satyam management, its board of directors, and senior executives, audit committee and its internal and external auditors. This seems to be a one-off incident and we need some more clarity to term this a systemic failure. So far what has come to the media glare may not be the whole story. This may have a negative impact on the confidence on CAs in general, said Mr Doshi.
Satyam is listed in the US and accordingly may face penal action by the US Securities and Exchange Commission. Under Sarbanes-Oxley Act 2002 of the US, the Satyam management and its auditors may face penalty as well as criminal proceedings for wilful mis-representation of financial statement, said Arijit Chakraborty, vice president Inkwest Management Consultant, a business advisory firm.
Another accountant said: Auditing as a profession may go down as a result of the incident. But unlike the Enron case in the US, no nexus has yet been proven between the auditors and Satyam. Also, auditors be in Big 4 or Big 20 get very little time to go through the information provide by the company given the pressure of quarterly audits. Having said that I must also say since cash was involved in this case, there must have been some lapse on the part of the auditors.
After all, auditors are required to go through reconciliation of bank accounts and obtain confirmation from bankers. They also need to check the fixed deposits.