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Both Ramesh Gelli and Ramalinga Raju were touted as the ‘pride’ of Telugu (Andhra) entrepreneurship. Both operated out of Hyderabad. Both turned out to be involved in embarrassing scams. These are not the only things they share. Global Trust Bank and Satyam also had the same auditor: Price Waterhouse. Both the companies have collapsed. Will Price Waterhouse survive this crisis? In 2001, the goose of another ‘Big’ audit firm Arthur Andersen was well and truly cooked when the Enron scam broke out. At the moment, all bets are off on whether Price Waterhouse will travel along a similar path of ignominy and collapse.
Quite predictably, the audit firm is keeping quiet and released a bland media statement when contacted by 4Ps B&M that states: “ Price Waterhouse are the statutory auditors of Satyam. The audits were conducted by Price Waterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence. Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities.” Do note the ridiculous and insulting use of the words alleged irregularities when the promoter Ramalinga Raju has himself admitted to cooking the books. For seven years, Raju took employees, clients, investors and other stakeholders for a merry ride and Price Waterhouse could not find any irregularity! That really stretches credibility and imagination!
And the chickens could come home to roost very soon. Says Ved Jain, President, Institute of Chartered Accountants of India, “The auditor’s role is sacrosanct. It is impossible that a fraud of such magnitude would have escaped the auditor’s eyes. The magnitude of missing cash on the balance sheet, on the face of it, points towards the fact that auditors did have a role to play.”
The Institute of Chartered Accountants and other bodies will complete the investigations in a few months and the firm could be permanently debarred from practicing in India. That could well spell the death knell on a global scale. Experts are beginning to see a pattern in such ‘irregularities’ of PricewaterhouseCoopers on a global scale. Over the last few years, there have been many embarrassing examples of the firm getting caught (See Box). The $50 billion Madoff scandal is the latest one in which Price Waterhouse is facing legal action, along with Satyam of course. Meanwhile, in India, the new board has appointed KPMG and Deloitte as the new auditors. But shadows are already looming large over the audit firm even as new skeletons keep tumbling out every day. The Chief Financial Officer of Satyam Srinivas Vadlamani has been arrested and has confessed to the cops that the Raju brothers and Price Waterhouse were partners in the scam and he was kept entirely in the dark.
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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