Dennis Howlett has looked at the developing Satyam scandal in India:
There's an old saying: 'where there's a will, there's a way' and that is certainly true in India. Earlier today, the Indian government stepped into the troubled company and disbanded the entire board of directors.
And note the government said this too:
We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders.
Action against auditors of the company has already been initiated by the ICAI,
As Dennis says:
I don't know if this is a precedent but in the context of ongoing compliance issues, this is an excellent example of a government realizing that the risks in the current situation are too great for all stakeholders and is therefore taking decisive action. What's more, we now know a little more about what was happening at the company. Equally, we also know that PwC is now definitely under the hammer.
More to the point: can you imagine the UK or US governments taking similar action? We often think of India as a land of great inequality and as a mildly corrupt regime. I can guarantee that in the eyes of the world, such actions, when taken appropriately and at the right time are confidence boosters.
But the Boards of the banks that failed in the UK are still in place (by and large). I know they didn't commit fraud. But they failed spectacularly. Similar action would have been appropriate their too.
As would action against their auditors have been right.
But it didn't happen. I think we have a lot to learn.
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India has a strong left that has to be listened to. 10% of the country is Communist. And Nepal is on the doorstep.
All stake holders in India are equally concerned about the role of the auditors PwC against whom ICAI has initiated preliminary inquiry.SEBI(Securities Exchange Board of India) too has asked ICAI to undertake peer review of PwC and in India peer review can be conducted by a non peer firm to mean by a smaller firm of chartered accountants also. It is expected that ICAI takes impartial view on the matter as two of its council members are from PwC itself.PwC has kept mum for some time and now state that they have taken care of all the accounting standards in framing their report.I am afraid if that is true as basic norms have been thrown to wind.They failed to check the cash on surprise visit which was to the tune of INR 54 billion and the chairman states that it was inflated by false billing might have been due to booking cash sales and service receipts besides overvalued debtors and unrecorded liabilities to overstate profits which were actually to the tune of INR 600 million.SEBI now purposes to form its independent panel of auditors.Some times back there was a proposal to have the auditors on rotational basis from amongst the panel but that was not carried through on account of the big stalwarts in audit arena.Time is now ripe for independent appointment of auditors out of the panel maintained by C&AG(Comptroller and Audit General of India).This to some extent will have check on the auditee company as the auditors shall be responsible to C&AG.SEBI in India is quick to initiate action unlike in UK and in that respect and even ROC in India swiftly acted in dislodging the directors.Satyam’s chairman must have been under pressure from some quarters.Such falsification can not occur unless the finance and accounts department is also a party to the same.Let us see the results of such concerted actions by the regulators for just comparision between the countries.
Vijay
Good comment
I agree with your sentiments
Richard