We have blogged earlier about PricewaterhouseCoopers, the official auditors of Satyam, the Indian IT firm, scalded by the scam perpetrated by its Chairman Ramalinga Raju. Since then, Satyam has been bought by Tech Mahindra and Deloitte has been hired as the new statutory auditors. All this has happened in a space of one year, with Ramalinga Raju being arrested on January 9, 2009, he is reportedly in the hospital now, though his brother and the Satyam CFO and other key officials are still imprisoned.
This case continues to twist and turn, and here are some very recent developments from the Indian press (mainly The Economic Times (www.economictimes.com) and CNBC-TV18 (www.moneycontrol.com):
First and most recent, the Supreme Court of India today granted bail to the PricewaterhouseCoopers partner Mr. T Srinivas, on the basis that the bulky charges (over 55,000 pages) could lead to a long-drawn trial in the case and the accused was already lodged in jail for over a year. The judges decided it would be of no use to keep the accused in jail, where he had been since his arrest on January 24 2009. Mr. Srinivas has been asked to post bail of about US$40,000 and two sureties. The court also directed Mr. Srinivas to appear before the police in the first week of every second month and not to tamper with the evidence or influence witnesses in the case.
Second, the scam has had larger impact on the PwC Indian firm, with about 200 professionals leaving PwC India for other firms, mainly due to adverse reputational impact. This is considered one of the highest and quickest attritions in Indian professional services. These 200 employees include the 19 partners who left along with Dinesh Kanabar, the widely-regarded head of PwC"s tax practice, who joined rival firm KPMG as deputy CEO in December 2009. These employees, across all level of professional services, have apparently moved onto other Big Four firms in India - KPMG, Ernst & Young and Deloitte. Reportedly, PwC has been trying to control attrition by attractive bonuses and larger professional roles. Note that PwC India has 6,500 employees, so this 3% by itself is not an unusual attrition level, but the rapid outflow in a short amount of time following a reputational event makes it all the more critical.
Third, recall that PwC India had made serious changes to the top management of the Indian firm, also bringing in Gautam Banerjee as the new Chairman from PwC Singapore in December 2009.
Fourth, in a recent interview with Dennis Nally PwC Chairman with CNBC-TV18 India TV, he acknowledged that the Satyam scam had hurt the PwC brand, saying, "Without question the firm has had real challenges in India but that has not changed my outlook and view on the importance of India economy to global economic picture….It is going to take sustained performance and nothing short of that. Everything we do is a matter of focus. …If we do that and we do that consistently over a period of time the PwC brand in India will be as strong and as good as it has been in the past and where we want it to be into the future."
So this case moves on, leaving behind tons of collateral damage for all concerned. We can all ask how the auditors could have missed lining up company statements against bank statements to see whether the cash reported was really in the bank. Relying upon company management, however convincing they may be, should not have precluded independent investigation. That"s true auditing, isn"t it - an unbiased, critical and dispassionate view coupled with focus on the truth and unstinting efforts to show accurate financial information. Till the entire story comes out, we"ll never know what really happened, but deep inquiry at the right time could have prevented this crisis and taken it out at the bud.
PricewaterhouseCoopers, India, Satyam Computers, audit, bail, Ramalinga Raju
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