Auditors seeking refuge in disclaimers

Almost all audited accounts begin witha disclaimer: "We do not assume responsibility... in order to head off lawsuitsfrom banks and creditors of bankrupt companies. In 2002, whenPricewaterhouseCoopers (PwC) adopted these words in response to a ruling in theScottish courts which opened the way for banks to sue auditors for recovery ofloans, little did the biggest of the big 4 think it could hold them in goodstead in the Satyam imbroglio. By adopting such wording, most auditors absolvethemselves of any repercussions, explains a CEO at a pharmaceutical MNC, whichalso has its accounts audited by PwC. PwCs audit disclaimer had challengedaccounting norms at that time, given that it would limit theirliability."But, then, can one still bank on such an auditor? Indianclients of PwC which include companies like Novartis, Marico, GSK, Wyeth,Hinduja Venture and Glenmark amongst others answer in the affirmative. Eager togive the auditor the benefit of doubt in the Satyam case, none of the corporateswho have PwC as their auditor, is even considering changing their auditor.Group CFO at Hinduja, Prabal Banerji said, "We have not consideredanything from that angle, as of today."PwC also audits the accounts at GlenmarkPharmaceuticals, which has a board meeting on January 27 to declare its thirdquarter results. By that time, an official maintained, there would be muchclarity on the Satyam issue and "the board could then take a call."Leading FMCG firm Marico, too, believes it would be unsound to reactto this incident in a knee-jerk manner. "Before we reach any conclusions aboutany particular audit process or firm, we would like to understand as to whatwent wrongwas it a systemic issue with the company or with the audit firm, ordid any particular individual auditor or auditee fail in his or her duties,"contends Milind Sarwate, chief HR and strategy at Marico. Asked ifthe company was considering changing its auditor, a GlaxoSmithKline officialresponded: "One should not jump the gun. Let us see how this plays out." AddedGlenmarks official: "Auditors are also appointed by shareholders and one shouldtake shareholders permission for discontinuing one and bringing on another."Novartis India, which has its accounts audited globally by PwC, hasa board meeting on January 22.