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Our reliance was on management controls over financial reporting: Price Waterhouse

A. Saye Sekhar

HYDERABAD: Price Waterhouse has informed Satyam Computer Services Limited that its audit reports and opinions in relation to the financial statements of the company should no longer be relied upon, in view of the contents of the letter written by former Chairman B. Ramalinga Raju to his Board of Directors.

In a communication sent to Satyam on Tuesday, it referred to Mr. Raju’s letter stating that the financial statements had been inaccurate for successive years. Even if these were partially accurate, they might have a material effect on the veracity of the statements for the audit period from June 2000 to September 2008. The effect was currently unknown and could not be quantified without a thorough investigation.

“Consequently, our opinions on the financial statements may be rendered inaccurate and unreliable,” it added.

Price Waterhouse said the financial statements for the period were prepared by the management. On its part, it planned and performed the required audit procedures on the statements and examined the books and records produced before them by the management.

“We placed reliance 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”.

Price Waterhouse referred to a guidance note issued by the Institute of Chartered Accountants of India (ICAI) on revision of audit reports in January 2003 which prescribed steps to be followed by the auditors to prevent reliance on audit reports in such circumstances. Hence, this advisory.

Such a requirement was also prescribed under the accounting standards in the United States where Satyam’s American Depository Receipts were listed.

“We wish to inform you that pursuant to Section 19A of the United States Securities Exchange Act of 1934, the information contained in the Chairman’s letter indicates that an illegal act could have occurred,” said the auditing firm and advised the Satyam Board to promptly commence an independent investigation pursuant to the U.S. laws.

“We hope to work with the company and provide necessary assistance to the new Board” to address any issues arising out of the investigations to fulfil the statutory obligations.

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