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ICAI finds Satyam auditors prima facie guilty
September, 30th 2009

The CA institutes probe on the role of external and internal auditors in the scam-hit Satyam Computer Services case has moved a step forward.

An internal committee of the Institute of Chartered Accountants of India (ICAI) has accepted the opinion of its Director (Discipline) that the auditors were prima facie guilty of professional misconduct in the Satyam Computer case. This has paved the way for the Institute to issue separate notices to the six found prima facie guilty of professional misconduct, Mr Uttam Prakash Agarwal, ICAI President, told Business Line.

The notices have to be replied in 21 days.

The opinion of the Director (Discipline) comes more than eight months after show-cause notices were issued, in the second week of January 2009, soon after the Satyam scam came to light.

The case is being probed under a revamped disciplinary mechanism that came into effect in November 2006. Under the new mechanism, there is no need to get the ICAI Central Councils approval for proceeding against a member. Getting the Councils approval would generally take six to seven months or, in some instances, even a year, say ICAI observers.

Now, complaints are being processed by the Director (Discipline) without going to the Central Council.

In the Satyam issue, Mr Agarwal said the Disciplinary Committee had last week considered and approved the opinion of the Director (Discipline).

Four persons of the statutory audit team of Price Waterhouse, Bangalore, including Mr S. Gopalakrishnan and Mr Srinivas Talluri, both partners and the two signatories to the Satyams accounts for different financial years, have been found prima facie guilty of professional misconduct. The other two persons in the statutory audit team who have been found prima facie guilty are Mr P. Siva Prasad and Mr Ch. Ravindranath.

Mr Gopalakrishnan was a signatory to the accounts of Satyam from 2000-01 to 2006-07. Mr Talluri was a signatory to the accounts over a period from 2007-08 to September 30, 2008. Both have been found prima facie guilty for failing in the duty of carrying out statutory audit and for not qualifying their report(s) for all these years (2000-01 to 2007-08) that the financial statement does not give a true and fair view of the affairs of the company.

Besides, notices are also being issued to Mr V. Srinivasu, Chief Finance Officer of Satyam from 2000-01 to September 30, 2008, and Mr V.S. Prabhakara Gupta, head of the internal audit cell of the company and responsible for carrying out internal audit for 2000-01 to September 30, 2008.

The ICAI President also said that notices are being issued to Price Waterhouse, New Delhi, and Price Waterhouse, Kolkata. These firms are independently registered with the ICAI as Price Waterhouse one with a New Delhi address and another with a Kolkata address.

ICAI regulation had allowed firms with a same name but different addresses to be registered with the institute. This regulation has been modified after the Satyam scam broke out.

Mr Agarwal said that the CA institute is issuing separate notices to the Price Waterhouse in Delhi and Kolkata.

The institute is issuing the notices for allowing the persons who are not its members to sign the balance sheets of Satyam on behalf of Price Waterhouse for a period from 2000-01 to September 30, 2008.

Soon after the Satyam scam broke out, ICAI issued show-cause notices to Price Waterhouse in Bangalore, New Delhi and Kolkata.

The firms in New Delhi and Kolkata replied that they were not the auditors of Satyam and therefore were not answerable to the allegations. They did not furnish any names of members answerable to ICAI.

However, Price Waterhouse, Bangalore (registered as Price Waterhouse Bangalore with ICAI) named Mr Gopalakrishnan, Mr Talluri, Mr Prasad and Mr Ravindranath as answerable members.

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