Satyam auditor deflects blame
Price Waterhouse, auditors of the troubled Indian outsourcing giant Satyam Computer Services Ltd., said Wednesday that its audit reports for the last eight years relied on potentially false data provided by the company and should be disregarded.
“Our audit reports and opinions in relation to the financial statements for the Audit Period should no longer be relied upon,” Price Waterhouse wrote in a letter to Satyam’s new board of directors, which was filed with stock exchanges in India and New York, as well as government and regulatory authorities in India.
Price Waterhouse, the Indian firm that is part of the PricewaterhouseCoopers global network, said it had relied on information from Satyam management and therefore its assessments of the company “may be rendered inaccurate and unreliable.”
Price Waterhouse’s comments did little to assuage investors, who say the auditing firm should have been able to root out $1 billion in fictitious deposits. Several say they may sue the firm.
“This is the basics. When you are doing an audit and a client says, ‘I’ve got a billion bucks in the bank,’ you check with the bank that it’s there,” said Hugh Young, who oversees $30 billion in assets as managing director of Aberdeen Asset Management’s Asia funds.
Satyam’s founder and former chairman, B. Ramalinga Raju, confessed this month to doctoring the company’s books for years.
Ravi Nath, an attorney in New Delhi, said clients had approached him about suing Satyam and Price Waterhouse.
“Can the auditor say, ‘We were shown these scraps of paper and our responsibility ends there’?” Nath said. “No. Auditors are required wherever possible to check the veracity of the information.”
Nath said that under Indian law Price Waterhouse’s partners could be liable.
“If there is a claim Price Waterhouse can’t pay, the claimant can go after the individual fortunes of each of the partners,” he said.
Holders of Satyam’s U.S.-listed shares -- which have been halted from trading on the New York Stock Exchange while regulators investigate -- have filed at least two class-action suits against Satyam.
