Satyam to Replace Auditor, Aims to Restate Finances
JANUARY 12, 2009, 2:44 P.M. ET
By ERIC BELLMAN in Hyderabad and JACKIE RANGE in New Delhi
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Attention at troubled Satyam Computer Services Ltd. is shifting toward those who were responsible for the company's books and who failed to prevent one of India's biggest corporate scandals.
On Monday, Satyam's new board, freshly appointed by the Indian government, said it is looking for a new auditor. The firm's current auditors, PricewaterhouseCoopers, have worked with Satyam for about eight years. A replacement firm is expected to be named in the next 48 hours, according to Satyam's new board.
Now, Satyam needs to redo its books going back years and appoint new officers before it can move forward, said newly appointed director Deepak Parekh, who is also chairman of lender Housing Development Finance Corp. Only after the new board has confirmed the actual state of finances, he added, will it be able to decide whether the company needs a bailout from private lenders or the government.
"New independent accountants that we appoint shortly will restate the numbers and confirm the veracity of those numbers," Mr. Parekh told a news conference in Hyderabad following the first meeting of the government-appointed board.
PricewaterhouseCoopers declined to comment Monday. Last week, the firm defended its procedures and said, "The audits were conducted by Pricewaterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence." It also said last week it was cooperating with regulators.
The Satyam scandal is raising questions about how India's other companies are run, and how closely regulators monitored them. On Monday, the Confederation of Indian Industry, an industry group, said it was setting up a special task force to look at corporate governance issues.
Last week Satyam's founder and chairman, B. Ramalinga Raju, resigned after admitting he had fudged the books for several years, including creating a fictitious cash balance of more than $1 billion. He and his brother, B. Rama Raju, the company's former managing director, were jailed Friday, and Satyam's chief financial officer, Srinivas Vadlamani, was arrested over the weekend.
Neither Mr. Vadlamani nor his lawyer could be reached for comment. Lawyers for the Rajus declined to comment Monday.
The costs of the scandal are rippling beyond the imprisonment of top Satyam executives. Already, Satyam is facing class action lawsuits on behalf of investors that hold its American depositary receipts. Investors in Indian shares are pulling out of companies in which they have lost confidence. On Monday, India's benchmark index, the Sensex, shed 3.2%. Meanwhile, Satyam's shares soared 44.2% after the government-appointed board was named.
Write to Eric Bellman at eric.bellman@wsj.com and Jackie Range at jackie.range@wsj.com
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