Comments on: Satyam Next Steps

By: Vasu

Vasu — Mon, 12 Jan 2009 11:45:16 +0000

Checking bank balances is a very simple check that is carried out routinely during any audit. There was a total of about 5000 Crores under cash and bank balances of Satyam's Sept 09 results of which 3200 crores were in long term fixed deposits – again very easy to check – just get confirmation from bank or look at statements. I find it hard to believe the auditors did not do this basic check. Or were they given forged statements ?
Could it have been possible that money – all of it was indeed there as of the audit in the bank as per books but was later withdrawn and carried home in gunny bags ?? if that is possible then there is a lot more mess to it than thats out so far…

By: Krishna

Krishna — Mon, 12 Jan 2009 07:14:20 +0000

Auditors swear by their fiduciary obligations towards shareholders (it’s the shareholders that appoint auditors in general meetings as per law), but remember, it’s the management that cuts the check – hence they are less inclined to embarrass managements. Auditors, Indian or foreign doesn’t matter; they all belong to the same tribe. It’s for the shareholders to get activist and throw out the auditors that wink and nod. Satyam was not an ingenious scam, huge balances in current accounts quarter after quarter with accrued interest not being reflected in cash flow statements could've easily been questioned. But they just chose to ignore and paid the price. Or as one would suspect, the partners were silenced by the largesses doled out by the management, not just Raju…

By: Krishna

Krishna — Mon, 12 Jan 2009 07:09:11 +0000

There is not much difference in audit practice and processes, be they Indian or foreign. Underlying accounting principles are same everywhere. In fact, Indian accounting standards figure among the best. Foot note entry for stock options (instead of expensing them outright), out of balance sheet investment vehicles have long been allowed under foreign regimes but never under Indian accounting standards – something that insulated our banks from going under as opposed to serial bank collapses elsewhere. Minor variations are there only in presentation of accounts (as in US GAAP, IFRS, Indian GAAP), grouping and classification under different heads, rates of depreciation, tax treatment, provisioning etc depending upon requirements under local regulations – as can be easily reconciled from one to other. Managements will follow prudent practices and sweep less under the carpet if they realize shareholders have a hawk’s eye. Like they say, every subject gets the king he deserves; Cut to our times, every shareholder gets the auditor he asks for and crafts his own financial destiny in the process.