Ruling on PwC in Satyam case raises questions | india | Hindustan Times
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Ruling on PwC in Satyam case raises questions

Last week, a Delhi High Court decision forced the Institute of Chartered Accountants to withdraw a notice it had issued to auditing firm Price Waterhouse’s Delhi unit about the Satyam scandal.

india Updated: Nov 09, 2009 22:01 IST

Last week, a Delhi High Court decision forced the Institute of Chartered Accountants to withdraw a notice it had issued to auditing firm Price Waterhouse’s Delhi unit about the Satyam scandal. The high court decision recognised that the Delhi unit of Price Waterhouse had nothing to do with the Bangalore unit because it was the latter whose partners were alleged to be part of the accounting irregularities in Satyam, which has since changed management to become Mahindra Satyam.

While this decision must be legally correct, it nonetheless amounts to Price Waterhouse successfully pulling off dirty trick on the investing public. The auditor of a listed company is providing a service to the entire investing public and plays a critical role in the functioning of the capital markets.

The quality of accounts being what they are in this country, the identity (or brand) of the auditor is an important input to the investing process. It is a sad reality that the mere fact of a company’s accounts being audited is meaningless in India. Every investor and analyst who reads an annual report checks who the auditor is. A balance sheet of a large company that carries the stamp of a small, unknown accounting firm or that of an in-house favourite carries a certain connotation of its own.

It is usually implied that when you read the name of a globally recognised accounting brand in a balance sheet, you expect to be able to trust that the name actually represents that organisation. You expect that across that entire organisation, there would be an internal system of checks, balances and responsibility, with a predictable sense of quality and fraud control.

Now it seems you would be a naive fool to expect any of this!

When you bought the Satyam stock and saw the name Price Waterhouse in the annual report, it didn’t mean what you thought it meant. Satyam’s promoter committed an unprecedented corporate crime with the active complicity of auditors. But now, it seems the rest of Price Waterhouse was able to stand up and say, “Fooled you, guys! Satyam’s PwC was just those bunch of criminals in Hyderabad, they had nothing to do with us.”

The fact such chicanery is absolutely fine with our legal and regulatory system is a scandal, and potentially exposes us to more scams.