Financial Times

Satyam scam: PwC top brass in India to assess situation


PriceWaterhouseCoopers, the global consulting major, whose sister arm, Price Waterhouse, is currently in the spotlight for its role as the statutory auditor of the beleaguered SatyamComputer Services.

Media persons and policemen gather outside the office of PricewaterhouseCoopers (PWC), the auditors of Satyam Computer Services, in Hyderabad J. PWC said its office in South India has not been raided and it was assisting agencies investigating the outsourcing firm. REUTERS

It has been reliably learnt that PwC global CEO Samuel DiPiazza, Jr., along with some senior worldwide partners is currently in India to assess the situation, after widespread reports that Price Waterhouse’s alleged overlooking of Satyam accounts could impact the audit firm’s reputation and business in India. It is learnt that the global partners are actively considering restructuring the India unit.

Although investigations into Price Waterhouse’s role in the Satyam saga have just started, the media glare on the firm has made senior partners uncomfortable and that is the reason a likely reshuffle of the top team is on the cards, said persons familiar with the development. A PwC spokesperson declined to comment on the issue.

The likely reshuffle in PwC could also be because the global parent is serious about the Indian unit which in the previous fiscal year, is learnt to have made a business of about Rs 800 crore. PwC is also one of the oldest firms in the country, having audited about 140 firms last year, most of them being large blue-chip companies.

Reputation of auditing and consulting firms, especially those of the Big Four - PwC, KPMG, Ernst & Young and Deloitte - is considered key to their businesses as the signature of the firms on companies’ balance sheets gives credibility to the account statements.

In fact, that is the reason why companies hire the Big Four for attestation work despite the high fees that these firms charge. Other areas such as tax and advisory are typically mandated to mid sized firms.
Persons close to the development also said that a damage control exercise is likely as global partners are also concerned about the likely impact of the Satyam case on their existing clients. Already, KPMG and Deloitte, arch rivals of PwC, have more auditing clients than PwC, especially with Indian companies that have a presence in US. The reshuffle could likely include shifting current leaders to new responsibilities, said the persons who asked not to be named. Mr Ramesh Rajan is the current India head, having been elected as the CEO of PricewaterhouseCoopers’ India network of entities in 2007. Each India CEO has a term for four years.

Dinesh Kanbar, tax head at PwC, is another name that is doing the rounds. It is widely believed that Mr Kanbar may be given additional responsibilities, in addition to his current role. There were also unconfirmed reports that some very senior partners were planning to leave the firm.The hectic activity at PwC is in response to the reaction from investors and shareholders of Satyam who have been asking questions about the inability of Price Waterhouse, the statutory auditor, to check the presence of about Rs 5,040 crore in fictitious cash, after Satyam chairman B Ramalinga Raju admitted that accounts were false and inflated.

Accounting experts say that auditors could have detected the fictitious cash had they run a simple check of Satyam’s bank accounts.

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