Editor’s Note: Francine McKenna is the founder and Managing Editor of Re: The Auditors. She has more than 20 years experience in leadership positions in the Big 4 and in the professional services and consulting industry both in the U.S. and abroad. You can see all of her posts for GC here and can follow her on Twitter @retheauditors.
India’s Central Bureau of Investigation (CBI) recently arrested Mahindra Satyam’s internal audit head V S Prabhakar Gupta for his alleged involvement in the Satyam fraud. Gupta, who is Global Head of Internal Audit at Mahindra Satyam, held the same position in Satyam Computer Services Limited.

… arrest on November 21 of the company’s former global head of internal audit V S Prabhakar Gupta, who has been charged with “willful suppression of auditing irregularities.

Ironically, in 2006 Mr. VSP Gupta and his team at Satyam, “joined the elite list of companies across the world to have received the “Recognition of Commitment Award (ROC)” from The Institute of Internal Auditors, USA (IIA).
IIA Communications Manager Scott McCallum responded regarding the “award”:

Although their press release indicated that it was an “award,” in actuality, it was a “recognition” presented by The IIA after their company submitted required documentation demonstrating their “commitment” to internal audit quality… Any company was eligible to receive this same “recognition”. Satyam was not singled out as superior… The IIA had not attested to the quality of their internal audit practices or compliance with IIA Standards through a Quality Assurance Review.

Internal auditors have a tough job. While some companies are very supportive of the function, many look at internal audit as a necessary evil and a cost center. In the end, even with a professional code of ethics and a reporting relationship directly with the Audit Committee, internal auditors are still beholden to the company, as an employee or paid vendor. They are human – subject to self-interest and, potentially, coercion in the name of keeping their job/engagement.
It’s pretty unusual for internal auditors to get caught up in scandals. They’re typically “inside” guys not flashy “outside” guys. As employees or vendors, they are often left with a Hobson’s choice: Lose their job/client by objecting or quit, tell story, get blackballed.
Was Mr. Gupta really an active player in the scandal or just a passive enabler? Some reports paint him as a strategic advisor who gave scammy ideas to the CEO/CFO.

Gupta had connived with the conspirators in not raising his voice when there were indications of bungling of accounts by the management, particularly in creation of fictitious invoices. As the head of internal audit, Gupta did not resist the management when it denied access of software highlighting irregularities to an independent audit committee.

I have been accused of naïveté regarding Indian business practices:

…India ranks around 120 on the Transparency International’s list of most corrupt countries….almost all Indian listed companies except maybe the Tata group and HDFC companies are riddled with some degree of fraud or corruption.

India is actually 84th. My reporting of the Satyam scandal is unfair how?
The Indian regulators’ latest charges confirm my earliest suspicions – that the Satyam scandal was deeper, more widespread, and required the complicity of many, both inside and outside the company. The PwC India partners are still in jail a year later awaiting trial for their crimes.

The investigative agency also claims to have collected more evidence against PricewaterhouseCoopers’ two auditors Subramani Gopalakrishnan and Talluri Srinivas, who have already been charged with ‘knowingly certifying forged and inflated balance sheets’. “Further evidence collected revealed the role of two statutory auditors in the fraud.”

The commenter went on to say it’s “the sheer hard work of the employees of [Price Waterhouse India] which has kept the firm afloat for 125 yrs [sic]…it is not uncommon for the firm to have partners who are related to each other as we live a long family tradition. Typically the partners of the firm are very conservative and many times would marry there sons and daughters in families which have a long tradition in public accounting therefore creating a more and more refined gene pool of public accountants who go on to serve the firm.”
So, Price Waterhouse auditors in India are a “super race” of the best and brightest? Half-human and half- sly, cunning Bengali tiger?
Who knew?