The Satyam fraud is acting like a wake-up call for several Indian companies that have started asking their auditors to make detailed presentations on the accounts that they have already certified.
The role of the auditor has come under the scanner after two auditors from Price Waterhouse, who verified Satyams books of accounts, were hauled up by investigating agencies which are trying to understand the financial shenanigans that Satyam promoter B. Ramalinga Raju perpetrated over several years.
Many of the companies that have made the requests to the auditors for presentations are listed on the bourses. A senior official with the Institute of Chartered Accountants of India (ICAI) said the requests were informal in nature.
Audit firms that have received such requests include the Big Four and local firms. It seems that top management is keen to re-acquaint itself with the nitty-gritty of accounting and audit norms and procedures that have been adopted.
Sources said the companies were looking for reassurance from audit firms. The independent directors on the boards especially the ones serving on the audit committees have been insisting on these presentations.
The audit committee directors at several Indian companies are very nervous at this point of time. Companies are keen that auditors come back to take another look at the accounts and comfort them with additional information on how these audits were done and the precautions taken during the procedure, said a partner with one of the Big Four firms.
The names of the companies that have opted for these informal presentations are not known as yet. However, some audit firms said the practice was spreading.
ICAI president Uttam Prakash Agarwal said, I have not heard of managements questioning auditors about the procedures they adopted during the audit process. If they are, then it is a reaction to Satyam.
But, I must say that it is unfair as nobody has yet pinpointed that the auditors were involved in the Satyam fraud. It was done by Satyams management and it wasnt a case of negligence by the auditors. Id also like to ask how many of the managements of Indian companies actually understand accounting and auditing procedures. It is a specialised field and the reaction of companies is baseless and really not required, Agarwal said.