Hyderabad: New auditors were named on Wednesday to inspect the books and restate the doctored accounts of Satyam Computer Services Ltd in the first move by the government-appointed board to unravel the country’s biggest accounting scandal.
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Satyam’s auditor Price Waterhouse has come under scrutiny for failing to detect the fraud which Raju, 54, confessed he had carried out. KPMG and Deloitte aren’t replacing Price Waterhouse, said board member Kiran Karnik.
“The appointment of KPMG and Deloitte is on an ad hoc basis for the purpose of restating the accounts and not for replacing existing auditors, which can be done only at the annual meeting of the shareholders,” Karnik said.
Karnik said the board would meet soon, perhaps as early as on Saturday, if all three members’ schedules permitted. That meeting would look at appointing a new chief executive officer and CFO.
Raju’s confession brought corporate governance standards practised in India under a cloud of suspicion, shook investor confidence and plunged the future of Satyam’s 52,000 employees into uncertainty. Raju, his brother Rama Raju and Satyam’s chief financial officer, or CFO, Srinivas Vadlamani, have been arrested.
Price Waterhouse said on Wednesday that the audit reports of Satyam can no longer be relied on after Raju’s confession. In a letter to the new directors sent to the Bombay Stock Exchange, or BSE, the accounting firm said Raju’s admission that Satyam’s finances had been inaccurate for several years rendered the audits invalid. It had relied on financial statements from Satyam to prepare the report, it said, claiming to have complied with the regulations of the US market watchdog, the Securities and Exchange Commission.
Meanwhile, executives of Satyam reaped Rs8.63 crore from share sales in the six months before the botched 16 December takeover of two companies owned by founder Raju’s sons and the confession of fraud caused a record decline in its stock. The takeover plan was scrapped after an investor revolt.
Nine officials led by the CFO, Srinivas, sold a combined 267,358 shares since 14 July, according to filings by the company to the BSE. That’s more stock than the combined insider sales at 30 companies on the Sensex, according to data compiled by Bloomberg.
Raju’s 7 January confession sparked an 83% plunge in Satyam’s stock that wiped out $2.2 billion of investor wealth. On Wednesday, Satyam’s shares fell 4.16% on the Bombay Stock Exchange to close at Rs29.95 on a day when the benchmark Sensex rose 3.3%.
Bloomberg contributed to this story.