You might have read news regarding PWC’s disqualification for 2 years from auditing.
Why did it happen?
8 years ago, almost to the date, I received an email message – Satyam scandal with a copy of an email apparently from Ramalinga Raju, Chairman of Satyam Computers to SEBI and stock exchanges.
Satyam used to be the bellwether for corporate governance in India bagging highest awards at every event. It was the fourth largest Indian company in the IT field, had around Rs. 40 billion cash in its books and was looking to raise Rs. 150-200 billion from the market with its astonishing and seemingly impeccable record.
The hallow had collapsed.
Mr. Raju confessed to masterminding a Rs 70 billion scandal by falsifying the company’s accounts. He had been inflating the cash and bank balances of the company for years. In his own words “I was riding a tiger and did not know how to get off without being eaten”.
Mr. Raju also manipulated the books by non-inclusion of certain receipts and payments, resulting in an overall misstatement to the tune of Rs 123 billion over 5 years. Fake debtors to the tune of Rs. 5 billion were created.
As a result, the company’s revenue got over-stated by Rs 47 billion over this period.
Surprisingly, all this happened while one of the Big 5 firm was handling the audit of Satyam for years and generating millions of dollars. All the padding up and mischief continued to be undetected until confessed by Mr. Raju himself.
The enormity of the manipulation warranted a probe to continue for over 5 years.
Ramalinga Raju was convicted with 10 others in 2015. The list included partners from PwC, namely, Subramani Gopalakrishnan and T Srinivas.
SEBI passed an order yesterday finding PWC guilty in the aforesaid Satyam scam and barred its network entities from issuing audit certificates to any listed company in India for two years as well as disgorgement of over Rs 130 million of wrongful gains from PWC and its two ex-partners.
Satyam episode was an aberration to an otherwise compliant and sane Indian corporate culture. It gave valuable lessons to all quarters, hopefully to PWC as well.
May there be honesty and diligence by all at all levels!
About the author :
Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at firstname.lastname@example.org.