Re: Satyam Scandal - India's Enron
Lets get back to Satyam for a moment, shall we?
This scandal is interesting and mind-boggling on several fronts. The scale is huge (for example $1 billion, 94% of their cash is fictitious). Even though Satyam was only the fourth largest service company, there is no denying the impact this will have on the other large service companies in India, specifically, and all corporate entities, in general.
Bigger problem is the lack of credibility, not only for companies but also for the whole audit process. Satyam was audited by PwC - the largest accounting firm in the world. How could they have missed such a huge gap in their audit is definitely a question that will be asked. These kinds of scandals gobble up whole firms. The resignation letter of Chairman is head-scratching. He is talking about "gap" between book profits and real profits over a number of years. Indian accounting practices will now come under increased scrutiny and big players like Wipro and InfoSys will also be under increased pressure to revisit what the heck have they been doing all these years. Indian audit profession will likely undergo a serious re-evaluation with renewed focus on auditor independence and additional required procedures over internal controls and auditing cash, receivables and liabilities. All sounds fairly basic. US went through this painful exercise with Sarbanes-Oxley back in 2002 (post-Enron), now its Indians' turn to focus on these things more seriously.
Contradictory as it may sound, right now will be a terrific time to get into the accounting profession in India, as any new rules may dramatically increase the work for auditors there.
In terms of overall business climate, while there will be some trepidation for international companies to blindly rely on audited financial statements for Indian companies for a while, these relationships are build over time and are not easy to just quickly sever and take business elsewhere.