Price Waterhouse India admits, Satyam auditing not the only slip-up in india
April, 18th 2011
Five audit firms of Price Waterhouse India have admitted to the US markets regulator, the Securities and Exchange Commission (SEC), that deficiencies in their auditing process were not restricted to Satyam Computer , but extended to other companies audited by them in India as well.
This disclosure by PW India is in two documents released by the SEC on April 5 while concluding its findings on the Satyam accounting fraud case. For five years, between 2004 and 2009, B Ramalinga Raju, disgraced founder and former chairman of Satyam, booked fictitious revenues and inflated bank balances, right under the noses of the auditors from PW India. The main auditing practice in which the SEC found PW India auditors to be lax relates to not directly confirming cash balances with banks, but instead relying on documents supplied by the company.
Satyam overstated its cash balances with banks by nearly $1 billion without being detected by PW India's auditors. "Respondents failed to exercise appropriate professional scepticism," the SEC said. After the Satyam fraud was unearthed, PW India reviewed its other companies for similar deviations, according to disclosures made by the audit firm to the SEC. It is not known how many clients PW India audited or whether it found similar deviations. PW India declined to participate in the story.
Instead, a PW India spokeswoman referred to a press release issued by the audit firm in the aftermath of the SEC findings. In the release, PW India said it "neither admits nor denies the US regulators' findings", while agreeing to pay the $7.5-million penalty demand raised against it. In a related development, the Institute of Chartered Accountants of India (ICAI) - the Indian accounting regulator that has largely been a bystander in the whole matter - has sent notices to PW India audit firms. "Price Waterhouse has paid the fine as a firm," says G Ramaswamy , president of ICAI.