Satyam: PwC CEO raises more questions

2 Jul 2009

HYDERABAD: Chairman and CEO of PricewaterhouseCoopers, India, Ramesh Rajan’s statement given to the Central Bureau of Investigation (CBI) last week has raised more questions. Even as Rajan admitted to the CBI that Satyam’s audit was not done by Price Waterhouse (PW) and that S Gopalakrishnan and Srinivas Talluri were in no way attached to the firm PW, chartered accountants are surprised as to how the CEO never issued such statements on earlier occasions, when balance sheets of several listed companies were signed under the name of PW, by partners of Lovelock & Lewes.

Apart from Gopalakrishnan and Talluri, this list includes the names of P Ramakrishna, Sharmila A Karve, Anuradha Tuli and Kaushik Dutta. Among the various companies whose books have been audited by these six people are, GMR, Lanco, Saint Gobain, Moser Baer India Limited, Rain Commodities Limited, Infoedge and Satyam.

The balance sheets of these companies for 2007 and 2008, some of which are in the possession of this newspaper, clearly states that the firm’s share holders had formally appointed PW as its statutory auditor. The books have, however, been signed by either of these auditors who are not partners with PW but Lovelock & Lewes.

“How is it that PW never made an issue of this then? The only explanation perhaps is that the firm was also receiving certain benefits from these auditors and, hence, chose to keep quiet,” alleges a city-based chartered accountant. But this is not the only trap PW is caught in.

Considering that the firm did not refute this partnership by estoppels (or presumption), as called in auditing parlance, with the six auditors, PW can at any point be pulled up under the Companies Act of 1956.

Section 11 of this Act clearly states that “no company, association or partnership consisting of more than 20 persons shall be formed for the purpose of carrying out any other business (apart from banking)...”. However, if these six auditors are added to the list of existing partners of PW the number exceeds this figure. Elaborating on this, another CA says, “There are two firms by the name PW in India. The one with head office in Kolkata has 20 partners and the other with head office in New Delhi has 18 partners (as per ICAI records, also available to TOI). Now, if we add these six auditors to any of these firms the number will be more than 20.”

“This in turn declares the two PW firms as unregistered companies according to the Act and, hence, under Section 226 of the same Act, does not authorise any of its partners to audit the books of any company,” said sources further adding, “In that case the audits conducted by these partners so far stand invalid.”

Questioning why PW has remained quiet about all this until now, CAs and other auditors in the country say that the firm is also punishable for this under various sections of the Companies Act.