Tainted Satyam auditor Price Waterhouse heads for a disgraceful exit as the new board of the IT Company is believed to have initiated steps to remove the auditor midway. Sources said the new board will approach the central government with this proposal and then take it up with the company’s shareholders.
Price Waterhouse’s faliure to detect the multi-crore scam is being seen as main reason behind its exit.
Removing an auditor a rare case in this business is not an easy process and as per Section 224 (7) of the Companies Act, any company that wishes to fire an auditor before the expiry of his term needs to call a general meeting of shareholders for doing so, after getting approval of the central government.
TN Manoharan, one of the government-appointed new board member of Satyam who is also the Chairman of the company’s audit committee, however, refused to confirm the development. “As of now, we have not decided anything on this. As and when the subject comes for consideration, we will take a decision on this,” he told.
Sources said the new Satyam Board, which has engaged Deloitte and KPMG for restatement of the company’s accounts, faces a very peculiar situation as the new accounts will have to be certified by the statutory auditor before being adopted by the shareholders. “In this case, Price Waterhouse continues to be the statutory auditor while also being under suspicion for complicity or negligence to the scam. Therefore, it would be awkward to engage the tainted auditor for certifying the restated accounts,” they said.
According to sources, the new Satyam management has zeroed in on a few Indian firms, one of which could be appointed as the new auditor. Manoharan refused to confirm the development.
Icai president Uttam Prakash Aggarwal, however, confirmed that the Satyam management was considering a new auditor for the company. “The management is certainly considering new audit firms. We have received a few proposals from them as they want us to verify whether there has been any kind of adverse action against any of these firms in the past,” he said.
Aggarwal hinted that the new auditor could be a purely Indian firm instead of being aligned to an MNC or rather the ‘Big 4’. “Around half a dozen firms are being considered for this role,” he said, though refusing to identify them. The process of restatement of accounts is expected to take at least 3-4 months as the two companies have to go through voluminous papers, statements and bank accounts. It is believed that they will have to scrutinise the company’s fudged numbers back to 2002. Apart from KPMG and Deloitte, a large team from a Chennai-based firm has also been appointed as the internal auditor that is also going through Satyam’s accounts.
