One of India’s most influential
accountants believes Price Waterhouse has gotten off lightly in
relation to its involvement in the Satyam fraud that broke in

Sunil Talati, a former president of the
Institute of Chartered Accountants of India (ICAI), believes the
firm should be held partly accountable for the actions of its

Price Waterhouse audited the accounts of
Satyam Computer Systems from 2000 to 2008. Satyam founder and chair
Ramalinga Raju admitted to fraud totalling more than INR7,000
($1.43 billion). India’s fourth largest IT company reported revenue
of $2.14 billion in its 2008 fiscal year; most of the missing
assets were in the form of cash and bank balances.

Price Waterhouse auditors S Gopala-krishnan
and Srinivas Talluri were arrested, jailed and charged over the
fraud but still await trial.

Who’s at fault?

Current Indian rules stipulate that
if partners of large firms are found guilty of misconduct,
individuals are punished but not the firm. Talati said the ICAI
council has debated this issue for several years.

“If the council or institute finds [the
partner of a firm] guilty and punishes him or removes him from
membership, the member suffers but the firm does not,” he

“And the firm day-by-day gets stronger by
virtue of the brand’s major international existence. So the council
members, the majority of them, were of the view that unless the
firm is punished the message will not get through.”

Talati says one question India’s
PricewaterhouseCoopers member must answer to is why it was
operating as seven individual firms but did not note this on
audited accounts.

“There was one firm called Messrs Price
Waterhouse, but they have another called Messrs Price Waterhouse
and Company, they have a third firm Messrs Price Waterhouse
Bangalore, a fourth firm Messrs Price Waterhouse Delhi and a fifth
firm Messrs Price Waterhouse and Company Kolkata, like that,”
Talati said.

“But when giving the published accounts they
were not printing this. They were only mentioning Price

“Strictly, they should have mentioned Price
Waterhouse Bangalore or Price Waterhouse and Company. So this kind
of allowing their name to be incorrectly printed amounts to some
fault on the part of the firm also.”

Talati believes that increasing the frequency
of auditor rotation would help prevent fraud in the future. This is
a point agreed upon by other partners speaking with the
International Accounting Bulletin for the India survey (see pages

Domestic vs Big Four

Talati is the proprietor of Talati
& Talati, a mid-tier firm with 15 partners and 190 staff. He
maintains that domestic Indian practices perform better-quality
audits than their Big Four rivals, but “unless Indian firms of
chartered accountants are in a position to mould themselves so that
they are if not as big but equivalent to these Big Fours, they will
not be in a position to compete”.

Two firm leaders believe the Satyam effect on
auditors has been greater scrutiny and caution in checking
documentation and management representations.

PK Chopra senior partner Sam Chopra believes
the role of the auditor has moved beyond simple fact checking.

“You have to give access and you have to
demand access to third-party records to company records, you cannot
rely on bank statements,” he said.

“You have got to go beyond that. We have that
age-old accord of watchdog and bloodhound. I believe that you’ve
got be a watchdog but you’ve got to sniff your way through as

BDO Haribhakti chief executive Sunil Sharma
added: “This is the first time in the history of this country that
accounting firm partners have been apprehended and not given bail
as yet.”

He said auditors will take a more inquisitive,
rather than box ticking, approach.