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Satyam accounts restatement is Rs 50-cr windfall for audit
July, 31st 2010

Mahindra Satyam may end up paying a huge fee for restatement of its book of accounts that were allegedly fudged by its former Chairman Mr B. Ramalinga Raju.

Indications are that the Hyderabad-based company will shell out close to Rs 60 crore by September when the accounts are expected to be restated.

If you include the forensic accounting and all other payments the company has to make for the restatement, the outgo will easily be north of Rs 50 crore'. With every round of delay, the costs are going up, a top official in the know told Business Line.

Days after Mr Raju confessed to fudging the Satyam accounts, a Government-nominated board had appointed auditing firms KPMG and Deloitte to help clear the mess.

Audit issues

Due to a host of reasons ranging from the complexity of the fraud to the unavailability of key documents, the restatement has fallen behind schedule three times already with the concomitant affect of pushing up the overall costs.

The company's outgo goes up given that most audit firms charge on a man-hour basis, sources said.

Mr Vineet Nayyar, Chairman of Mahindra Satyam, referred to this at a recent press conference, when he said that the Satyam accounts restatement is costing the company a fortune. However, he did not provide further details

A spokesperson for KPMG said, We do not comment on client matters. His counterpart at Deloitte said it was now the statutory auditor for the Mahindra Satyam accounts and no longer associated with the process of account restatement.

So, how do industry watchers view this development?

If the company is paying over Rs 50 crore for restating its accounts, just imagine what could potentially be the size of the fraud itself. I think that it is detrimental to shareholder interests, Mr Uttam Prakash Agarwal, former President of the Institute of Chartered Accountants of India, said.

The positive part, according to him, is that it sends a message to the corporate world that cost of investing in compliance cannot be substituted with anything else

In all fairness to the audit firms, the Satyam challenge was something unparallel in accounting frauds. During the course of the process, the two accounting firms had dredged almost two terabytes of data from laptops and personal computers at Satyam. Since this information is much more than what could have been warehoused anywhere in India, it was moved to the UK till lab facilities could be created here, a recent news report said.

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