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CBI says Satyam auditors played key role in scam
April, 27th 2009

Despite the auditors of the fraud-hit Satyam Computer Services pleading ignorance, the Central Bureau of Investigation (CBI) has accused them of colluding with the company's erstwhile management.

"It is revealed that as per the records maintained by the Institute of Chartered Accountants of India, S Gopalakrishnan and Talluri Srinivas are partners in the firm Price Waterhouse Bangalore and not in Price Waterhouse. Both the accused, by affixing their signatures on the audit reports for and on behalf of Price Waterhouse deliberately with the knowledge of its implications and consequences, violated the requirements of Auditing & Assurance Standards (AAS) 28," the CBI said in its chargesheet.

Satyam had contracted PW chartered accountants as statutory auditors in 2000. S Gopalakrishnan, a partner at the auditing firm, had endorsed the accounts of Satyam from 2001 to 2007. Talluri Srinivas took over Gopalakrishnan's role in 2007.

Satyam's ex-CFO Srinivas Vadlamani knew that the auditors were not the representatives of PW, but of Price Waterhouse Bangalore, it said. The auditors were also found to have "deliberately" not verified the information they have about the company's financial health with the banks and other institutions, the chargesheet said.

The CBI charged that the auditors had a quid pro quo arrangement with the conspirators for overlooking the facts because of which they were paid exorbitant audit fee. The CBI has also found the letterheads of PW in the computer systems of the other key accused and the company, which were meant to communicate with the banks for seeking the actual information on Satyam independently. The CBI said the letterheads were used by the conspirators for creating statutory records on their own.

There was information coming in from banks about the real financial health of the company, the CBI said.

However, it was Gopalakrishnan who first started ignoring the information to accommodate that given by company officials alone. In fact, Price Waterhouse itself had found deficiencies in Satyam for the first time in 2006-07.

According to the chargesheet, IT general check was carried out for the first time in 2006-07 by head of information systems audit of Price Waterhouse, wherein about 180 deficiencies were found, and was communicated to the audit team with the assertion that the IT systems in Satyam are not fully integrated and are subject to manipulation.

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