Audit reports may be deemed unreliable, says PwC

Hyderabad, Jan 14 (PTI) Price Waterhouse, auditors of
Satyam for over eight years, has informed the scam-ridden IT
firm's new board that its audit of the company's financials
could be "inaccurate and unreliable" in view of the financial
irregularities disclosed by Ramalinga Raju.

Noting that it has been auditing Satyam Computer since
the quarter ended June 2000 till September 2008, Price
Waterhouse said that all those financial statements were
prepared by the management.

It further said that it relied "on management controls
over financial reporting, and the information and explanations
provided by the management, as also the verbal and written
representations made to us during the course of our audits."

Satyam as well as PwC are the subject of regulatory and
government investigation into the country's biggest corporate
fraud - involving Rs 7,800 crore - disclosed by Satyam founder
Ramalinga Raju. Raju, his brother Rama Raju and Satyam CFO
Vadlamani Srinivas are in judicial custody now.

"We hope to work with the company and provide assistance
to the new board of directors to address any issues that arise
in the course of such investigations to enable both the
company and us as your statutory auditors to fulfil
obligations under applicable law."

Copies of the letter, dated January 13, were also sent to
RoC Hyderabad, SEBI, RBI, Central Board of Direct Taxes, BSE,
NSE and NYSE.

Earlier on January 7, the then Satyam Computer Chairman
Ramalinga Raju had stated that the financial statements of the
company have been inaccurate for successive years.

In view of Ramalinga Raju's letter, PwC said, "We hereby,
in accordance with the guidance note, state that our audit
reports and opinions in relation to the financial statements
for the audit period should no longer be relied upon."

The audit firm further added: "The contents of the said
letter, even if partially accurate, may have a material effect
(which effect is currently unknown and cannot be quantified
without a thorough investigation) on the veracity of the
company's financial statements presented to us during the
audit period.

Consequently, our opinions on the financial statements
may be rendered inaccurate and unreliable."

The statement by PwC comes in the wake of the chartered
accountants body ICAI constituting a six-member special
committee to look into the auditing of crisis-hit Satyam
Computer, whose disgraced founder chairman Ramalinga Raju has
confessed to fudging accounts.

In accordance with the Generally Accepted Accounting
Standards in the US, PwC said, "We advise that the board of
directors of the company should ... commence an independent
investigation pursuant to section 10A of the United States
Securities and Exchange Act ... to determine whether such
illegal acts occurred and if so their nature and extent."

"We wish to advise that the company should promptly
notify any person or entity that is known to be relying upon
or is likely to rely upon our audit report that our audit
opinion should no longer be relied upon."

Yesterday Andhra Pradesh Police had conducted searches at
the offices of PwC, in Hyderabad. PTI DRR
AM