At the end of 2008, Satyam Computer Services was one of the darlings of India's IT outsourcing sector. With annual revenues of over USD1 billion, its clients were spread across the globe and included a healthy swathe of Fortune 500 companies. It was the winner of the World Council for Corporate Governance's Golden Peacock Award and a few years earlier Ernst & Young named Satyam's founder and Chairman, B Ramalinga Raju, Entrepreneur of the Year.
7 January 2009, Raju resigned and confessing to hiding about USD1 billion in cash shortfalls. In a letter made public, he admitted he had been fixing the books for seven years. He wrote; 'It was like riding a tiger, not knowing how to get off without been eaten.'
Recently in Japan, a sudden ousted of a British-born, non-japanese speaking CEO, accidentally led to discovery of over 15-years cooking of accounting books in Olympus Corporation. Over USD1.7 billion money was involved. The ousted CEO, Michael Woodford, an Olympus veteran of 30 years, was speculated as being there as puppet to the Board.
What was interesting in the two incidents above is the failure of the external auditors to detect the misappropriation of accounting records for a very long time, involving a substantial amount of money. In Olympus case, the prior auditor, KPMG AZSA LLC does not want to participate in a probe conducted by a panel set up by Ernst & Young ShunNihon LLC.
In US, audit firms involved would opted for out of court settlement. A compensation will be paid to the financial authority, without admission of negligence. The victims would be the investors, losing their money without knowing the real truth of what was really happening, leaving them with no choice except for civil suit to recover their investment.
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