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Satyam Board Replaced, Auditor Probed in Fraud Claim

India sacked Satyam Computer Services Ltd.’s board and started investigating auditor PricewaterhouseCoopers LLC, two days after the software maker’s founder claimed he’d fabricated $1 billion in assets.

Ten directors nominated by the government will meet in the next week to appoint managers at Hyderabad-based Satyam, Corporate Affairs Minister Prem Chand Gupta said. Officials have seized documents at India’s fourth-largest software exporter and the nation’s accounting body is examining PWC, he told reporters.

“The developments so far indicate that the current board of Satyam has failed to do what it was supposed to do,” Gupta said in New Delhi today. “The government is committed to punish everyone found guilty, including the auditors.”

Satyam plunged for a second day in Mumbai trading on concern it may run out of money after Raju said he falsified the accounts “for several years” and quit. The scandal, whose scope is being likened to the 2001 bankruptcy of Enron Corp., has shaken confidence in Indian companies and accounting standards.

“The fact that the audited accounts don’t represent true and fair picture raises an issue that is bigger than the Satyam scandal,” said M. Damodaran, former chairman of the Securities and Exchange Board of India. “If some guy has taken liberties with the system, the person or persons has to be identified and punished.”

Houston-based Enron’s 2001 bankruptcy wiped out more than 5,000 jobs and $1 billion in employee retirement funds. The Enron scandal triggered tougher U.S. accounting rules and the creation of a board to oversee auditing firms that review the financial statements of publicly traded companies.

Source: bloomberg