Now we know that the Enron, Bernie Madoff kind of tremors can shake even India. Only, this time a different epicenter – Satyam, Hyderabad.

People refuse to learn lessons. We are not sure why. The story of the auditing firm Arthur Andersen’s complicity with Enron would have and should have taught a lesson for erring auditing firms. Arthur Andersen (the firm) turning its face away from the Enron executives’ diabolic scheme and signing off the balance sheets for the energy giant year after year is rather incredible. It’s incredible in the sense that its willingness to let go the reputation it built over decades, drop its workforce from 85000 approximately to mere 200 and diminish itself into an inconspicuous law firm in Chicago.

What for? Arthur Andersen (the person) earned a great name for his honesty and for his firm and the firm itself was a whistle blower in the past when clients were erring. To its credit, it had advised FTSB about considering stock options as expenses rather than compensation. All these accomplishments were erased by a single stroke of pen literally. Was Enron too powerful for it to handle or Enron’s money too big for it to lose? Or was there just “greed race”? AA was happy to take the same stride with Worldcom with the “experience” it gained from the dwarfed Enron scandal. But still are all of these even worth to the level of losing its CPA license?

From the point the venerable term Big 5 has been reduced to Big 4 – with the remaining Deloitte & Touche, Ernst and Young, PricewaterhouseCoopers and KPMG possibly sharing the clients of AA – to now, there was enough time for large and small accounting firms to get their acts fair and square. But what we sense currently is still a lost opportunity for many firms or at least for PricewaterhouseCoopers (PWC).

PWC has dug its own grave or in the process of doing so. The trio Ramalinga Raju, Chairman, Srinivas Vadlamani CFO of Satyam Computers and the PWC were counting on “horoscopes” to build the “gap” rather than corporate financial acumen? (Adolf Hitler and his propaganda secretary Dr. Joseph Goebbels were counting on “relief through horoscope” when Stalin’s Russians were approaching Reichstag in the center of Berlin – Horoscope might have pointed them to commit suicide). Isn’t Satyam honesty in Sanskrit? Exactly. That’s why Ramalinga Raju was “honest” in admitting his inability to bridge the gap between $1.1 billion and $100 million. What remains to be seen is his claim that he didn’t take even a rupee for his own use is honest or not. That is very unlikely to be an honest one with the way he practiced business.

PWC claims for its part that it followed highest accounting and auditing standards while auditing Satyam. Simple matters like checking the bank balance about Satyam’s cash in hand entry of the assets side of the balance sheet, random summoning of related document from employees other than those at executive level, etc would have told a lot of stories about what’s cooking. If PWC hasn’t performed these trivial tasks, its more than a century of professional experience is trash. If PWC has done its homework and done it meticulously then probably it knows what’s going on inside Satyam but decided to turn the other side like AA did for Enron and WorldCom.

What’s worrying us is this: Is PWC turning the other side in favor of rest of its clients’ “dark accounts” or just for Satyam because it happened to emerge big like Enron, at least in its cooked books?

Perhaps PWC would have thought “Big 4” is too big a number for the world to deal with and the right one is “Big 3”. So it is collaborating with clients like Satyam  to  accomplish that goal through their  falsified accounts. Well. Will it stop here? Or are there further reductions in the “Big” counts? Deloitte, E&Y and KPMG should wake up if they are not already.

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