ICAI Interrogates Satyam Auditors & CFO

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CMA KNVV Sri Vidya - Sri Kanth

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11269 Points Joined November 2008

ICAI Interrogates Satyam Auditors & CFO

PRESS RELEASE
April 6, 2009
ICAI INTERROGATES SATYAM AUDITORS & CFO –
CFO ADMITS HIS ROLE IN FALSIFICATION OF ACCOUNTS
In terms of directions of the CBI Court, Hyderabad allowing members of the High Powered Committee of the Institute of Chartered Accountants of India to examine and record statements of the three accused members of the Institute viz. CA. S. Gopalakrishnan, CA. Srinivas Talluri, auditors and CA. Vadlamani Srinivasu, CFO of Satyam, a team led by CA. Uttam Prakash Agarwal, President of the Institute and Chairman of the High Powered Committee along with CA. Shanti Lal Daga, a member of the Committee and a member of the Central Council of the Institute, interrogated the three accused members currently lodged in Chanchalguda Central Prison, Hyderabad.

The interrogation went on for the whole day, during which the CFO admitted his role in aiding the Chairman, B. Ramalinga Raju and Managing Director, B. Rama Raju in fudging and falsifying the accounts by forging and creating fake records. He was candid enough to admit that he along with the Vice President (Finance), G. Ramakrishna, a Cost Accountant by profession were actively involved in the scam. He admitted his involvement in the planning of the scam, which was masterminded by the Chairman and the Managing Director. According to him, another team which was directly reported to the CMD, led by G. Ramakrishna executed the plan by fabricating and preparing false documents such as sales invoices, bank statements, bank confirmations, by involving a team of around 10 junior staff.

The CFO further admitted that neither the auditors nor the independent directors were aware of the scam. He also mentioned that no pecuniary benefits were derived by the auditors and that it was not true that the auditors had confessed to their alleged role, as was reported earlier in the media.

Tracing back the events, the CFO mentioned that what started as a small adjustment in the accounts 5-6 years ago, continued quarter after quarter and year after year and by the second quarter of 2008 had attained unmanageable proportions. He also mentioned that the CMD initially assured that the falsification would be rectified after one or two quarters, but it went on. He stated that he had resisted the attempts, but could not do much in view of master-servant relationship. He stated that he had twice submitted his resignation, but was pursued by the CMD to continue, so that the company does not collapse and the future of 54,000 employees is not endangered.

The CFO expressed his regret and shame on having been a party to the scam, which according to him, was masterminded by the Chairman and Managing Director and abetted by him in planning and by G. Ramakrishna in its execution.

CA. Uttam Prakash Agarwal expressed his satisfaction on the outcome of the interrogation which had vindicated his belief about the credibility of the auditing profession. According to him, despite the existence of Audit Committee, independent directors, internal audit, integrated audit under SOX, information systems audit, whistle blowing mechanism on the inherent risk in the internal controls, the scam had occurred owing to a carefully crafted fraud by creating normal trails and backup support documents and records, which had kept the fraud unchecked and undetected for as much as 5-6 years.

Later in the night, the ICAI submitted a report to the CBI investigation team, prepared by a Group constituted to assist the Multi-disciplinary Investigation Team of the CBI. The report covers the outcome of the limited exercise done by the ICAI Group on the role of auditors in compliance with the Auditing and Assurance Standards issued by the Council of the Institute of Chartered Accountants of India, in respect of some of the issues relating to financials of Satyam for past 4-5 years, based on the copies of the documents provided by the CBI.

About ICAI

The Institute of Chartered Accountants of India (ICAI) set-up by an Act of Parliament viz. The Chartered Accountant Act, 1949 to regulate the profession of Chartered Accountancy is the second largest and prominent accounting body in the world. It has been taking various proactive measures from time to time, aligned with the changing facets of the Indian economy, for continuously raising the standard of quality of accounting and financial reporting. The quality of education and the standards of examination of the Institute are acknowledged to be the best in the world.

ICAI has its Headquarters at New Delhi with 5 Regional Offices at Mumbai, Chennai, Kanpur, Kolkata, New Delhi and 118 branches spread all over the country. In addition, it has also set up 21 chapters outside India and an office in Dubai. Currently over 4,50,000 students are pursuing the Chartered Accountancy course and the total membership of ICAI is more than 1,50,000

Replies (2)

CMA A.K.ROY

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188 Points Joined November 2007

SOME COMMENTS IN ET

Geetanjali, Mumbai, says: This is something really ridiculous. The ICAI cannot simply say that its not the fault of the auditors. Preparing financials is the duty of management whereas checking the authenticity of the financials is the duty of auditors. PWC should not be given clean chit.
[7 Apr, 2009 1151hrs IST]

Peters, Melbourne, says: Price Waterhouse must pay a price for its delebrate negelence and accordingly must be deregistered. Nothing short of this would be acceptable.
[7 Apr, 2009 1027hrs IST]

Jit, Sharma, says: Guys, Its a matter of Rs 8000 Cr. They can buy the entire country's judicial system with this. I am thinking that one we'll see a news that Raju is dead and actually he'd living with a new name in another country.
[7 Apr, 2009 0208hrs IST]

Ex Satyamite., chennai, says: Well said Sam .There are lot more heads to roll in this scam ..Where is Ram Myanpati..he was in the Board and he says he doesnt know anything Ex Satyamite.
[6 Apr, 2009 1631hrs IST]

AJ, Delhi, says: Who is this Mr. Aggarwal to give clean Chit to Auditors.He is jealous of ICWAI's progress in last few months. Has not he given the clean chit to accused auditor one month back by involving him in 11 committees of ICAI. MR. Uttam Aggarwal please keep quite and let CBI and Govt do thier work you are nobody to make these statements.
[6 Apr, 2009 1624hrs IST]

Jeya, Oman, says: You are able to smell a cover up from a long distance. It is clear that ICAI is trying to protect the reputation of the auditors. PWC has clearly failed in not being duly deligent and need to pay for their negligence. Suspend the license of the members of the audit team who failed to detect glaring fraud right under the nose. It defies common sense to accept that the entire fraud is perpetuated by merely falsifying a few documents. How the data in the information systems were falsified? What is the role of the system administrators and others? It looks very fishy and reputed organization like ICAI giving clean chit to PWC sounds strange and raises doubts on the integrity of ICAI.
[6 Apr, 2009 1615hrs IST]

Mousumi, Mumbai, says: It is smelling foul,is there some fixing to bail-out the image of auditing profession or is there some face-saving kind of an attempt by the PWC. Remember S.VADLAMANI initially admitted he had no knowlegde of the fraud perpetrated by the CEO and was made to sign documents and had even hinted complicity of the auditors in the crime. ICWAI should cross-examine srinivas vadlamani.
[6 Apr, 2009 1201hrs IST]

Preeti, Mumbai, says: If the auditing firm can't detect the fraud, it better stops working. Else lets eliminate the concept of auditing because if PwC can be fooled so easily, anybody can be. If Satyam can do it, anybosy else can. However, this impacts hugely the lives of billions others working with separate firm. The CFO and the rest were thinking of employees after the fraud had started and continuing with it for their sake???? why did they not think of this before? And once they started, they though nobody would ever know? Why were they recruiting if they were so concerned? Why did they not outplace people if they were doing everything for them? Do they realise what happens to those innocent people now? Do they pay from their pocket now? The simple answer is everything was done by the Satyam leads only for themselves. The irony is they are still lucky to be fed daily in the jail while the innocent, unfortunate employees - from the sophisticated MBAs to the housekeeping suffer..the economic scenario only adds to their wows.
[6 Apr, 2009 1133hrs IST]

Kakan, Mumbai, says: I think this is the technique of passing the buck to ICWAI. While Mr CFO has said that he was asked to stay away from Banking affiars by his boss then how Mr Ramakrishnan was involved as a junior to CFO. ICWAI should be permitted to ask all the relevant persons. ICAI is trying to get the support of ICWAI to clean their images just by this technique
[6 Apr, 2009 1059hrs IST]

Ram, Mumbai, says: This is clearly planting the fraud in connection with ICWAI. Vadlamani has been fipping and flopping his confessions.Earlier at the first instance he confessed that he was no knowledge of the fraud and it was all a promoters affair. Then he confessed in the police surrender that he was an M.Com. Then he blamed the auditors. Now he exonerates the audit profession(presumably at the behest....)and auditors. Again he blames his junior a cost accountant as a part of the fraud. The point in question is skirted.... How did he sign the document(annual accounts) which he had sufficient reason to believe(by virtue of his own confession)is not reliable and had elements of fraud. As a CFO did he exercise due diligence. How can a CFO(accused of fraud)exonerate the auditors on their role in the fraud,when in his earlier confession he had implicated them by saying that i had signed the documents (annual accounts)without due process of checks. How can the auditor escape the liability of absense of due-diligence,when they has themself admitted in a news paper reprot that their audit reprots are based on unreliable accounts. There seems to be much beyond that can be reckoned by common man. ICAI enquiry team has fulfilled tha purpose much beyond its brief(it is felt).