Srinivas Talluri is a worried man, having spent 20 years in the accounting profession, he would have wished the 7th day of the new year would never had happened. He is now guilty of certifying and giving a clean chit to the three golden rules of audit reports on Satyam's financials.... how he wished his last certification on Satyam's would have looked like this
Reproduction of Satyam's audit report (changed for our readers)
In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and give a Satya(m) and fair view in conformity with the accounting principles generally accepted in Rajuland
(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2008; excepting for cash balances which have been overstated by Rs. 5000 crores, based on explanations and informations given by the management, the corresponding credit has been shown as a loan payable to Maytas or the offset could be in reserves and surplus,
(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; excepting for only excel based workings given on interest accrued of Rs. 376 crores on the above cash balances and no confirmations or orders were found for revenues invoiced of Rs. 500 crores resulting in higher debtors, however the resulting higher profits have been offset by taxes booked against the same
(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date excepting for grossing up the financing activities where the offset to the cash balances of Rs. 5000 crores were shown as loans received.
April 21, 2008
Having worked in the audit profession, I can picture the scene at PWC's office in Hyderabad these is what it could look like
- The entire audit team of PWC would have been redeployed on Satyams e-audit workpapers, all scheduled leaves, vacations and other audit assignments would have been called off, beleive me, its worse than army deployments (PWC was the first to go on electronic audit documentation in India)
- Article clerks will be given the mundane tasks of scanning the documents given by the seniors, seniors will be sharing confidential papers with the managers, managers will be wondering what to shred and what not to
- There will be a set of article clerks who will be filling out the checklists including questions on Integrity of management, fraud checklist, accounting standard checklists etc
- There will be a huge demand for green and red pens, after all linking of all audit work papers would need to be done...
- Audit confirmations will be treated like GOLD, seniors would be combing the postal section of PWC's office to trace if at all any banks/debtors had confirmed balances. on PWC's stationary...... senior managers will be telling the seniors ..." I told you not to rely on email confirmations"
- Someone, would definitely be searching for the management rep letter if at all signed by Raju
- Managers and Senior Managers will now be recasting the reasons used in the variance analysis - a very popular tool used to audit balance sheet items..... imagine the answers which would have been documented for increase in cash balances, receivables and for non-increase in liabitlites......
- And finally, someone will cast the schedules given (this practice has been done away with)... good chances are that someone will discover that higher bank balances of Rs. 5K crores were a result of casting errors, i.e. 10 FD's of Rs. 100,000,000 FD would have been shown as Rs. 10,000,000,000 on the excel schedule (with an extra 0) and the totals would have been a number entered on the cell, rather than a formula on the cell..... well if this happens to be the case, there is no audit negligence right..........
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