ICAI INTERROGATES SATYAM AUDITORS & CFO CFO ADMITS HIS ROLE IN FALSIFICATION OF ACCOUNTS
In terms of directions of the CBI Court, Hyderabad allowing members of the High Powered Committee of the Institute of Chartered Accountants of India to examine and record statements of the three accused members of the Institute viz. CA. S. Gopalakrishnan, CA. Srinivas Talluri, auditors and CA. Vadlamani Srinivasu, CFO of Satyam, a team led by CA. Uttam Prakash Agarwal, President of the Institute and Chairman of the High Powered Committee along with CA. Shanti Lal Daga, a member of the Committee and a member of the Central Council of the Institute, interrogated the three accused members currently lodged in Chanchalguda Central Prison, Hyderabad.
The interrogation went on for the whole day, during which the CFO admitted his role in aiding the Chairman, B. Ramalinga Raju and Managing Director, B. Rama Raju in fudging and falsifying the accounts by forging and creating fake records. He was candid enough to admit that he along with the Vice President (Finance), G. Ramakrishna, a Cost Accountant by profession were actively involved in the scam. He admitted his involvement in the planning of the scam, which was masterminded by the Chairman and the Managing Director. According to him, another team which was 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, by involving a team of around 10 junior staff.
The CFO further admitted that neither the auditors nor the independent directors were aware of the scam. He also mentioned that no pecuniary benefits were derived by the auditors and that it was not true that the auditors had confessed to their alleged role, as was reported earlier in the media.
Tracing back the events, the CFO mentioned that what started as a small adjustment in the accounts 5-6 years ago, continued quarter after quarter and year after year and by the second quarter of 2008 had attained unmanageable proportions. He also mentioned that the CMD initially assured that the falsification would be rectified after one or two quarters, but it went on. He stated that he had resisted the attempts, but could not do much in view of master-servant relationship. He stated that he had twice submitted his resignation, but was pursued by the CMD to continue, so that the company does not collapse and the future of 54,000 employees is not endangered.
The CFO expressed his regret and shame on having been a party to the scam, which according to him, was masterminded by the Chairman and Managing Director and abetted by him in planning and by G. Ramakrishna in its execution.
CA. Uttam Prakash Agarwal expressed his satisfaction on the outcome of the interrogation which had vindicated his belief about the credibility of the auditing profession. According to him, despite the existence of Audit Committee, independent directors, internal audit, integrated audit under SOX, information systems audit, whistle blowing mechanism on the inherent risk in the internal controls, the scam had occurred owing to a carefully crafted fraud by creating normal trails and backup support documents and records, which had kept the fraud unchecked and undetected for as much as 5-6 years.
Later in the night, the ICAI submitted a report to the CBI investigation team, prepared by a Group constituted to assist the Multi-disciplinary Investigation Team of the CBI. The report covers the outcome of the limited exercise done by the ICAI Group on the role of auditors in compliance with the Auditing and Assurance Standards issued by the Council of the Institute of Chartered Accountants of India, in respect of some of the issues relating to financials of Satyam for past 4-5 years, based on the copies of the documents provided by the CBI.
The Institute of Chartered Accountants of India (ICAI) set-up by an Act of Parliament viz. The Chartered Accountant Act, 1949 to regulate the profession of Chartered Accountancy is the second largest and prominent accounting body in the world. It has been taking various proactive measures from time to time, aligned with the changing facets of the Indian economy, for continuously raising the standard of quality of accounting and financial reporting. The quality of education and the standards of examination of the Institute are acknowledged to be the best in the world.
ICAI has its Headquarters at New Delhi with 5 Regional Offices at Mumbai, Chennai, Kanpur, Kolkata, New Delhi and 118 branches spread all over the country. In addition, it has also set up 21 chapters outside India and an office in Dubai. Currently over 4,50,000 students are pursuing the Chartered Accountancy course and the total membership of ICAI is more than 1,50,000.