‘Satyam’s auditors can’t hide under confidentiality clause’

CHENNAI - Auditing firm PricewaterhouseCoopers (PwC), which had certified the accounts of Satyam Computer Services as ‘true and fair’, is bound to disclose all facts and cannot hide under the client confidentiality clause, an auditing sector official said Saturday.

‘The confession of accounting fraud of a huge magnitude is an extraordinary situation. The auditor who certified the company’s accounts or the firm in which he is a partner cannot hide under client confidentiality clause,’ V. Murali, a member of the Central Council of the Institute of Chartered Accountants of India (ICAI), told IANS.

ICAI’s Financial Reporting Review Board has issued a notice to PwC asking for its views and the details of the auditors who certified the accounts. The board will also look at Satyam’s audit systems and practices.

‘We have also called for the working papers. Checking the audit working sheets as how bank reconciliation statement was prepared will throw more light on the accounting fraud confessed by Raju (B. Ramalinga Raju, the disgraced former chairman of Satyam Computer Services),’ Murali said.

‘If found guilty, the professional who certified the accounts will have to face disciplinary action and not Pricewaterhouse.’

In India, auditors are liable in their individual capacity and not the firm in which they are partners. As such, company shareholders, like those of Satyam, have the option of claiming damages from the certifying auditor.

According to R.G. Rajan, a city-based chartered accountant, as per ICAI’s disciplinary mechanism, an auditor cannot divulge the information acquired in the course of an audit to any one without the prior consent of the client. ‘However, shelter cannot taken under this clause if it is legally required to be disclosed,’ he said.

Satyam’s last balance sheet was certified by Srinivas Talluri and the 2006-07 accounts by S. Gopalakrishnan, both PwC partners.

Meanwhile, a section of auditors believe the presence of two PwC partners in ICAI’s central council - Harinderjit Singh and Gopalakrishnan - will hamper the enquiry process.

‘They should not participate in the institute’s activities as council members till the probe relating to Satyam Computer Services is over,’ a city-based auditor told IANS.

However, Singh said he is not a PwC nominee but got elected to the central council in his individual capacity.

Citing the ICAI’s disciplinary mechanism that holds only individual practicing member responsible for an audit lapses and not the firm, Rajan said: ‘On this count, I am not for Singh’s resignation from the council. As far as Gopalakrishnan is concerned, only a proper inquiry would be prove the alleged lapse or not.’

He said calling for Gopalakrishnan’s resignation at this point of time ‘would be punishing some one without giving him an opportunity’, and added: ‘But since these two gentlemen are at the moment members of the governing council of the ICAI, on moral grounds I would expect them not to participate in any of the affairs of the council or the institute till the allegations against the firm is cleared.’