Price Waterhouse hides behind client confidentiality

 Price Waterhouse hides behind client confidentiality

 

Mr Ved Jain, President, ICAI (file photo).

New Delhi Close on the heels of Satyam Computer Services Chairman, Mr Ramalinga Raju’s admission of revenue overstatement and inflated profits, the Institute of Chartered Accountants of India (ICAI) said that it would look into the role of statutory auditor in the financial irregularities of the company. Price Waterhouse, the company’s statutory auditor, declined to comment citing client confidentiality.

“One can expect severe action against any defaulting member. Based on the information that we have got today, we will initiate proceedings… This information (Chairman’s letter) is good enough to initiate investigation on the matter. We need to collect all the relevant facts and will move fast,” Mr Ved Jain, ICAI President, told Business Line.

Mr Jain said that the ICAI, which is the regulator of the auditing profession, could take action against members if there was any negligence on their part in their attest functions. Satyam Computer Services financial statements for the year-ended March 31, 2008 were audited by Price Waterhouse, a firm of chartered accountants.

In a statement, Price Waterhouse said : “We have learnt of the disclosure made by the Chairman of Satyam Computer Services and are currently examining the contents of the statement. We are not commenting further on this subject due to issues of client confidentiality.”

The legal position is that no formal complaint was required for ICAI to initiate disciplinary proceedings and it could be done on the basis of information available with the public through the media . “The confession letter of Satyam Chairman is 100 per cent fit case for reference to the Board of Discipline of the institute,” sources in the chartered accountants fraternity said.

Mr Jain said that the ICAI has initiated the process of collecting information on the Satyam case and sent letters in this regard to get all the facts.

The ICAI is yet to dispose of the matter relating to PriceWaterhouse’s role as auditor in the Global Trust Bank (GTB) matter. GTB was amalgamated with Oriental Bank of Commerce at the instance of the Reserve Bank of India (RBI). “The inquiry on the matter is still on. We will take it to its logical end,” Mr Ved Jain said.

Many chartered accountants and industry captains expressed shock over Satyam Chairman Mr Raju’s admission that the balance sheet as on September 30, 2008 carried inflated (non existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books).

They also noted that it was normal practice for auditors to do surprise verification of cash at least once in a financial year. In respect of bank balances, auditors independently take confirmation from banks for balances at the end of an accounting period, they added.

On how easy would it be for software companies to inflate revenues, sources said that it could happen through number of ways including showing consignment sales as regular revenues or recognising revenues on incomplete projects .