RCA

The questioning of Ramesh Rajan, chairman and CEO of PricewaterhouseCoopers, India (PwC) by CBI last week, has revealed that the Satyam balance sheets were in fact audited by Lovelock & Lewes and not Price Waterhouse (PW) - a revelation after 7 months.

It is also learnt that the auditing fees, though billed and collected by and deposited in the name of Price Waterhouse, Bangalore, was later transferred into the account of Lovelock & Lewes. "It is from here that the partners S Gopalakrishnan and Srinivas Talluri withdrew the money," sources involved in the investigation of the case told TOI. Nothing has been mentioned about which firm has accounted the fees as income or the TDS thereon.

Apart from Rajan, other senior partners of PW, from Delhi and Kolkata, were also summoned by the CBI. The partners denied any association with PW, Bangalore and said that Gopalakrishnan and Talluri were not entitled to sign any balance sheet on behalf of PW.

"So as it turns out, the auditors who are partners with PW, Bangalore, wrongly signed under the name of PW, and also outsourced the work to Lovelock & Lewes," said sources adding that investigations confirm that the entire auditing team at Satyam is from Lovelock & Lewes.

On being questioned by CBI about this "outsourcing" of work , Rajan, who is also a partner with PW, Bangalore said that the firm has no manpower and, hence, as part of an internal arrangement gives out their work to Lovelock and Lewes. "But this is not acceptable, considering that the two firms are completely different entities," said sources. It also makes a mockery of the procedure for appointing auditors under the Companies Act, 1956 by the share holders at the Annual General Meetings of the company.

An India-based auditing firm, Lovelock & Lewes, though is a network firm of the international consulting body PwC, has no authority to audit under PwC's name. The CBI is now in the process of recording Rajan's statement and also plans to summon other partners of PW, Bangalore for questioning, later.

"CBI officials are hoping to be able to interrogate some partners of PW, Bangalore who are not attached with any other firm, so as to get a clearer picture about the functioning of this Bangalore unit," sources told TOI adding that if need be, appropriate action would also be taken against this particular firm.

However, for now, the investigating body has decided to write to Sebi asking it to ban the two tainted auditors [it is not clear what action is proposed on the two firms - PWC and Lovelock & Lewes] from signing balance sheets of any listed company, in the future. "Even if they are released they should not be allowed to audit the books of any listed firm ever again. The financial fraud they have committed is of huge magnitude," said sources.

Source: CAinIndia.org