Mumbai: Project managers and delivery heads at Mahindra Satyam have over the past month faced random or surprise audits to ensure a higher degree of corporate governance.
Agents of change: Anand Mahindra (third from right) with Satyam board members and Satyam and Mahindra Group executives at a press conference in Hyderabad in April after Tech Mahindra won the bid for Satyam Computer Services Ltd. Noah Seelam / AFP
To raise the level of accountability, Mahindra Satyam has hired Grant Thornton India Ltd as its internal auditor and BDO Haribhakti India Pvt. Ltd to assist with Sarbanes-Oxley (SOX) compliance.
Grant Thornton India and BDO Haribhakti are the Indian units of the sixth and fifth largest global audit firms.
SOX refers to the corporate governance and financial disclosure standards mandated by the US federal legislation Sarbanes-Oxley Act of 2002. SOX compliance is mandatory for companies cross-listed on a US stock exchange, such as Mahindra Satyam, which has its American depository receipts (ADRs) listed on the New York Stock Exchange.
“We’ve been working with Satyam for the last few months, focusing mostly on putting control systems in place that will help impose a fair amount of structure internally,” said Shailesh Haribhakti, BDO Haribhakti chairman.
Santosh Nair, a partner at Grant Thornton India, confirmed that his company was working with Mahindra Satyam as its internal auditor.
“As part of new corporate governance standards, all project managers and delivery heads now have to be ready for random or surprise audits,” a senior executive at Mahindra Satyam told Mint on condition of anonymity.
The audits are done at the level of individual customer accounts.
Before Satyam’s founder and former chairman B. Ramalinga Raju confessed on 7 January 2009 that he had doctored the accounts by about Rs7,136 crore over several years, the company’s internal auditing was handled by an in-house team.
Soon after the confession, Satyam appointed Deloitte Touche Tohmatsu India Pvt. Ltd and KPMG India to re-state its accounts. And in December, the firm appointed Deloitte as its statutory auditor.
V.S. Prabhakar Gupta, who headed Satyam’s internal audit team, was arrested in November by the Central Bureau of Investigation and is currently in judicial remand.
According to the Mahindra Satyam executive mentioned earlier, data that has to be documented and is ready for the random audits includes details of background checks on those working on project, invoicing details, such as the hours put in by individual employees, and details of a disaster recovery plan, in case of emergencies.
“Some of these were in place earlier too, but now it is more organized and there is a regular audit at least once a month, besides the random or surprise audits that may happen any time,” the executive said.
Various third-party agencies, including the statutory auditor, internal auditor and the SOX compliance agency, will work in tandem to ensure that best practices are implemented and practised at Mahindra Satyam, BDO’s Haribhakti said.
“Increasingly, companies are realizing that internal auditing can be better done by external agencies,” said Neville Dumaisa, an executive director at KPMG India, heading governance, risk and compliance services.
“Rather than entirely outsourcing it to an external agency, a trend that is increasingly gaining importance is called co-sourcing, where a small in-house team works with the internal audit agency,” he said.