About the Blog

This is my diary....what I make sense of, around me. You'll find short prose on contemporary topics that interest me. What can you expect - Best adjectives? …. hmm occasionally, tossed around flowery verbs ?…. Nope, haiku-like super-brevity? … I try to. Thanks for dropping by & hope to see you again

February 1, 2009

ASatyam : Auditors or Spin doctors?

This is what I was left wondering after reading an article published in Business Today, circa March 2008 that I accidentally stumbled upon while clearing my book shelf recently. This was about an interview with Samuel A.DiPiazza Jr , World Wide CEO of Price Water House Coopers (PwC), a full 9 months before Satyam blew up in their face . The CEO in his characteristic style , answered to what could be termed as prophetic questions, on what would unfold later, and I am revisiting that conversation in this blogpiece just to put that perspective in hindsight. Makes very interesting reading & Here’s how it goes (ad verbatim)

Q:Is there still too much that firms like PWC do in terms of services to one client – you’re doing auditing , you are doing tax advisory and you’re also doing consulting for them. Wouldn’t there be some sort of conflict that gets built into this kind of model?
A: I simply don’t accept that. There’ve been considerable number of academic studies that have shown that where we have engaged with a client in a broader set of activities, the likelihood of audit failure is much lower because we have deeper understanding of the company (sic). Another piece of that is when we audit, we don’t just use accounts. Our auditing process requires tax people, it requires actuaries, it requires technology people – all different type of skills.If you were to take one of these audit firms & say ‘you only do audits’, we would have a very difficult time attracting those kinds of talents and the quality of audits go down
Q. Earlier you’d mentioned that businesses would continue to make mistakes. No one has issues with mistakes that happen due to bad strategy. But what happened in Japan with one of your clients in 2006 was cheating and that affected PwC very badly. So, have companies actually learnt and are they keen on being clean?
A. I think the vast, vast majority of companies have always had a commitment to being clean, to do the right thing, before Enron, and after Enron. But I also believe that you operate in a world where if people want to break the rules, if they feel personal pressure or greed, they’ll try to break the rules. And you need processes and activities to keep that from happening. And whenever we feel that one of our people has done something wrong—not just made a mistake, but something morally illegal—we take very harsh action, and our situation in Japan shows that. We, effectively, shut that firm down. It cost us hundreds of millions of dollars of business, but we didn’t blink.
Q. But do you think it’s possible for auditors to prevent fraud?
A. Actually, I think auditors prevent fraud every day because we are the eyes and ears of industry. We come to the table with an independent point of view. We test, question, and we challenge. CEOs encourage us to do this. So, there’s no question in my mind that the entire audit profession has, over the years, prevented fraud. We find often, during the course of a year, people pushing that envelope. And most of the time it’s not visible, it’s not public because it’s fixed before it ever becomes a factor. People are fired, and it’s very quiet and that’s the job we have.
Q. In some sense, you’re not just the eyes and ears of the industry, but also the conscience of the client.
A. Yes, and boards… you asked about change. Today, CEOs and supervisory boards are deeply into what we do. So, it’s not “we and they”, we’re in this with the boards and with the management. Reputational damage done through financial mis-statement is huge and no one wants their name connected to that. No board member, no supervisory board member and no CEO. Sometimes, the pressures they put create that incentive in their company and they have to understand that they can only push so far before people might go too far.

In an interview earlier in 2003 in the same Magazine, DiPiazza while making a case against Auditors being consultants has echoed “Actually, you do not need a consulting project to corrupt you. The audit fee is large enough to corrupt you if you aren't a person of integrity.”

He is the author of the book ‘Building Public trust: The future of corporate reporting’ , which for all you know may be being read & reviewed by Ramalinga Raju in his downtown prison in Hyderabad.

2 comments:

Anonymous said...

Current Mail in circulation

Reports have come in that Ramalinga Raju had 20 idlis for breakfast, five plates of
rice and a bucket of rasam for lunch and 25 chapatis with two chickens for
dinner.. But the jail superintendent says these numbers are inflated. "You
see, the habit is so deeply ingrained in Raju that he automatically inflates
all figures," he added.

Incidentally, his cellmate Srinivas Vadlamani, Satyam's ex-chief financial
officer who has denied all knowledge of wrongdoing, said he didn't know
whether he had any meals. "I am not aware whether I had breakfast, lunch or
dinner," he said. "Am I in jail?" he asked.

Meanwhile, insiders say that Raju has decided to teach accountancy in order
to impart his skills to a receptive audience. "I'm really excited at the
prospect of being taught by such a master," said a murderer serving a life
sentence. "My problem has been that I don't know where to hide the bodies,"
he explained, "I'm sure that a guy who can hide Rs 7,000 crore for so many
years can easily hide a score of bodies."

A stream of visitors has also been arriving at the jail, all wanting to meet
Srinivas Vadlamani. Inquiries revealed they were promoters of companies,
eager to have him on their boards. "Where will I get such an ideal chief
financial officer?" asked a person who said he was CEO of a company called
Black Hole Ltd.

Even the jail superintendent says he is extremely happy with Raju. "He is a
financial genius," he exclaimed. He said Raju had outlined a scheme that
could save the jail a huge amount of money. "Raju explained that all I
needed to do was to allow the inmates to choose their own guards. He said
these guards would cost a fraction of the current salary being paid to jail
warders. I was a little hesitant about prisoners choosing their own jailers
at first, but relented when Raju said that it was exactly the same he is
doing with companies — they all appoint their own auditors and nobody
complains."

Incidentally, even the Naxalite prisoners lodged in the jail are very happy
with Raju. "We have been working for decades to overthrow capitalism, with
no effect," said their ringleader. "And then Comrade Raju comes along and
wrecks the system from within, giving Indian capitalism a resounding blow.
We're electing him to the party's central committee," he added.

But Raju is unlikely to take up the offer. He has a job offer from Nigeria
to run the huge network that sends scam emails to people promising to
transfer billions of dollars lying in unclaimed money to them once they give
their bank account numbers and a small advance payment. Unconfirmed reports
say that to make the schemes look authentic they're thinking of asking
accounting firm Pricewaterhouse to certify them.

Others say Raju is exploring a lucrative option in a related field. "He's
thinking of becoming a godman," said a source, "Which is why he is reading
religious books."

Some also say that Raju is being paid a fat advance for a novel based on his
Satyam swindle. "It's clear he has plenty of experience of writing fiction,"
pointed out a publisher.

And lastly, in a curious but related incident, teachers at a prestigious
school in Hyderabad were shocked when young Bunty Reddy of class 5B told his
class-teacher that his father was a male bar dancer.

Investigations revealed, however, that his dad was actually an independent
director on the boards of several companies. "In the circumstances, it's
natural for the child to be ashamed of his parent," said the principal, "And
that's why he tried to pass his dad off as a male stripper."

By all accounts, Satyam ex-chairman Ramalinga Raju is having a rollicking
time in Chanchalguda jail. His popularity among the inmates, all of whom are
in awe of a man who can make Rs 7,000 crore disappear, knows no bounds.

"Some of us affectionately call him by his nickname Scamalinga," said a
petty thief, "But most just call him Gurudev."

Piyush said...

A sample of how Raju’s interrogation by the stock market daddy SEBI could be progressing
Raju Raju? Yes Papa
Missing Assets? No Papa
Telling lies to acquire Maytas to save your skin?
No Papa
Show me your balance sheet
Cooked papa
Ha ha ha

Feedburner Count