Auditors caught up in India’s Satyam scandal have been charged with the offence of luring investors to buy shares of the company by ‘knowingly certifying forged and inflated balance sheets’.
The allegations against PricewaterhouseCoopers’ Subramani Gopalakrishnan and Talluri Srinivas have been detailed in a written submission by the Central Bureau of Investigation (CBI) of India, made to the High Court in the state of Andhra Pradesh. The law enforcement body is opposing a bail application made for the accused.
Maintaining their innocence from Hyderabad’s 19th century Chanchalguda jail, where they have been held for the last five months, Gopalakrishnan and Srinivas have tried seven times in the lower court to get bail before approaching the High Court earlier this week. They have called themselves scapegoats for an entire system that failed to catch years of wrongdoing at Satyam Computer Services Ltd.
However, according to CBI, the Satyam affair was a rarest of rare case where a gigantic fraud was perpetrated by the management with active connivance of the statutory auditors of the company.
Citing evidence linking one of the accused to the fraud, the agency has told the court that a whistleblower’s e-mail to one of the independent directors of Satyam was forwarded to Gopalakrishnan, but the latter rejected its contents.
The CBI also told the court that the evidence of diversion and misappropriation of Satyam funds through foreign bank accounts has come to light, and the agency has sought the help of Interpol to identify the end use of these funds. The agency said that its multidisciplinary investigation team is now engaged in scrutinising the receipts of money coming from abroad.
The two partners have been suspended from work by Price Waterhouse India (the company’s name in India) and have continued to receive support from the firm during court proceedings.
Meanwhile, any bad publicity associated with the Satyam affair does not appear to have dented PwC’s reputation. It has announced that it will be increasing its staff by 50% in India.
A spokesperson for the firm in Mumbai told Accountancy Age: ‘PwC in India has been growing very strongly for the last few years, both organically and by strategic alliances’. Calling India ‘a very important strategic market for the PwC network’, and coupled with a strong growth in the Indian economy, he added that the ‘staff strength in India could increase to over 10,000 (from the present 6,500) in three to four years.’
PwC is looking forward to the introduction of IFRS in India, which it said will offer further opportunities to the accounting profession. ‘The recent announcement of a partial sale of state-owned industries and the government’s plan to encourage overseas companies to have secondary listings in India are both excellent opportunities for the profession as these programmes will require the support of quality audit firms,’ said the spokesman.
This expansion plan follows PwC’s formation of a four-member advisory board mainly comprising of retired Indian civil servants. Earlier this week in New Delhi, the board members were visited by Dennis M Nally, chairman designate of PricewaterhouseCoopers International.
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