Accounting firms fear aftershocks
The Rs 7,000 crore fraud at Satyam Computer Services, dubbed “India’s Enron”, has shaken investor confidence in the world’s Big Four accounting firms, which have expanded rapidly in Asia despite a general shortage of qualified accountants.india Updated: Jan 09, 2009 00:04 IST
The Rs 7,000 crore fraud at Satyam Computer Services, dubbed “India’s Enron”, has shaken investor confidence in the world’s Big Four accounting firms, which have expanded rapidly in Asia despite a general shortage of qualified accountants.
Ramalinga Raju, founder and chairman of India's fourth-biggest software services exporter, resigned on Wednesday, saying profits were falsely inflated for years.
“This is shocking. I can’t even let my thoughts go in the direction that there is another Satyam somewhere,” said Shailesh Haribhakti, executive chairman of BDO Haribhakti, a consulting and management services firm based in Mumbai.
“I have very high respect for PricewaterhouseCoopers who are their auditors, but it’s incredible that such gross things existed and were not discovered,” he said.
PwC said it was examining Raju’s five-page resignation letter and declined further comment, though one insider said the accountant was as shocked as anyone at the admission of years of financial deception at Satyam.
PwC staff in Asia said they had received emails on Thursday telling them not to discuss Satyam publicly.
PwC accelerated its Asia expansion in 2002 when it took over offices and staff from Arthur Andersen, which was auditor for Enron and once one of the “Big Five” global accounting firms, along with PwC, Ernst & Young, Deloitte & Touche and KPMG.
Like its three big rivals, PwC has grown rapidly across Asia, particularly in China and India, recruiting thousands amid fierce competition for talent.
Frank Lyn, PwC’s Beijing-based China Markets Leader, told Reuters in November that a shortage of talent was the firm’s top challenge in China.
It can take three to five years to groom a fresh graduate at a major firm like PwC to the level of senior associate, who can meet clients directly for accounting services. But firms in busy markets have sometimes fast-tracked new hires in services that can be beyond their professional level.
Sharmila Gopinath, research director at the Asian Corporate Governance Association in Hong Kong, said accounting firms face a lack of qualified people at all levels in Asia.
“Sometimes people, especially at the top, find themselves stretched at certain levels, especially when it comes to supervision of work,” she said.
First Published: Jan 09, 2009 00:02 IST