Satyam’s Big 4 auditor under fire for negligence

One of the most glaring discrepancies in the audited financial statement and actual financial position of the company is the cash balance of the IT giant. The audited results show a cash balance of Rs 5,361 crore while the actual amount with the company was just Rs 321 crore. Auditors say that even though some of the figures mentioned by Raju in his confession can be explained one way or the other,this one is hard to defend as the auditor’s assessment of the cash balance is based on a bank certificate.

“Either the very certificate was fudged or the firm has not done its work,” said a senior Mumbai-based auditor. To top it all is the accrued interest of Rs 376 crore,which never existed. Even the accrued interest of such a huge amount is generally accepted by the auditor only on the basis of a bank certificate.

“When we take into account receivables for the firm while computing assets,it has to be backed by invoices maintained by the sales and marketing departments,” another auditor and council member of Institute of Chartered Accountants of India (ICAI) said.

“Since the operating margins could be calculated on the basis of a sample test,there is a possibility that there could be minor discrepancies in figures. But a swing of 21 per cent is hardly explicable,” another ICAI member said.

Satyam chairman Ramalinga Raju’s statement puts Price Waterhouse in a more difficult position as it seems to indicate that mismatched figures were being given to investors for quite a few quarters without the auditor’s knowledge.