Price WaterHouse Coopers & Satyam Fraud
HYDERABAD/MUMBAI: B Ramalinga Raju’s admission that Satyam’s books of accounts were essentially a work of fiction is only the starting point of understanding the real story of how the biggest financial fraud in India’s history was perpetrated. Mr Raju’s letter of confession reveals a fraud of at least Rs 7,136.34 crore. But it throws up more questions than it answers.
What has baffled accounting professionals is the fact that a software company which earns bulk of its income from overseas customers has committed a fraud of this magnitude. The scope for window-dressing and creative accounting is much more in manufacturing firms where large-scale machinery procurement is involved, valuation of inventory is carried out and stage-wise valuation for work-in-progress of various projects at different location is done.
But IT companies bill customers for the services provided to them. So, did Satyam raise fictitious bills to non-existent customers for services that were never provided? A fake bill props up sales and profits and also bloats the balance-sheet through higher receivables. The more serious question is : did PwC not look into the contracts against which the bills were raised before they signed off the accounts? And did they fail to do this basic check for years?
One Comment for this post
Interesting Article, i hadn’t heard of this, but i’ll def. be looking into it, its great, thanks.
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