Thanks for your insight.

The article tells the story of how PwC US used Satyam to rebuild its systems integration practice and possibly teamed up with PwC India and Satyam to sell Satyam’s services to their clients, audit and non-audit, outside of India. Any kind of business relationship like this is forbidden under US independence rules under the SEC, given the fact that Satyam was a US listed audit client. PwC US technology skills were pretty much on-existent, save a few people and practices, after the IBM sale and they were forbidden to provide any “technical” services until after the IBM non-compete was up, summer of 2007.
Francine

The other thing which may come as a surprise to some of the readers of this blog is that my understanding is that PwC India folks are pretty distressed with being viewed as having some substantiality commonality of interest with PwC US as they have no common ownership and often the relationship between the two firms can be strained as they pursue there own respective economic interests/goals. The only thing that is probably common is that they hold out to the world that they operate under one common name with some governing structure which ensures commonality of standards.

The real reason why the Audit failure probably happened and may happen again in India is that due to the competitive nature of pricing by local firms the general level of audit fee in India is quite low, vis-a-vis the risk being carried. The audit fee for satyam was on the higher end from an Indian standpoint but still i guess would not even cover the salary compensation cost of the team. When you consider that other audits that the firm would be carrying would be even more unprofitable you will proabably reach to a conclusion that Audit arms of Indian Big 4 firms are bleeding and that means, there staff and partners are grossly overworked, probably underpaid vis-a-vis other comparable jobs like strategic consulting. I did a dip stick survey a typical manager in a Big 4 assurance firm in India is paid around INR 1.5 million (US$30K) while a similarly experienced Manager at Bain&Co or Mckinsey in india is paid INR 7 million (US$150K). What do you think all the auditors in these firms are doing trying to focus on enhancing personal skills and running through interview processes through the year to be accepted by a White shoe firm or PE fund or an investment bank to make real money. The real problem in India is to increase salaries in audit firms to be competitive with the well paying consulting, PE fund type jobs once that happens you will attract better talent, the audit teams will have more interest in their jobs and audit will be a sought after career, the issue are systemic its just that it has come up in one case, but my guess is that it will happen again either with PwC or some other Audit firm Big 4 or otherwise..

And be careful what you say — as Advisory has for years carried their weight and even more weight than audit. A team means that we carry each other and work with each other. At this moment in time you might be real careful as the odds are high that if the two groups separate it will be advisory that survives the economy and advisory that doesn’t get sued for audit failures and such.