PricewaterhouseCoopers, auditors of Satyam Computer Services, wrote to the new Satyam board on Wednesday extending full support in investigation.
The Rs 7,800 crore (Rs 78 billion) Satyam scam is the biggest fraud in India's corporate history.
"We hope to work with the company and provide assistance to the new board of directors to address any issues that arise in the course of such investigations to enable both the company and us as your statutory auditors to fulfil obligations under applicable law", the PwC letter said.
Copies of the letter, dated January 13, were also sent to Registrar of Companies, Hyderabad, Securities and Exchange Board of India, Reserve Bank of India, Central Board of Direct Taxes, Bombay Stock Exchange, National Stock Exchange and New York Stock Exchange.
It is quite a shock that the company's management, mainly disgraced chairman B Ramalinga Raju, kept everyone -- seemingly -- in the dark for a decade.
The question now arises what were the auditors, PricewaterhouseCoopers, doing? There was no cash in the company's banks and yet the auditors went ahead and signed on the balance sheets saying that the money was there.
Not just the cash, they even signed off on the non-existent interest that accrued on the non-existent cash balance!
Auditors do bank reconciliation to check whether the money has indeed come or not. They check bank statements and certificates as well.
The cops have already raided the PwC office in Hyderabad, but details of what they have found are yet to emerge.
PwC also informed the scam-ridden IT firm's new board that its audit of the company's financials could be 'inaccurate and unreliable' in view of the financial irregularities disclosed by Ramalinga Raju.
Noting that it has been auditing Satyam Computer since the quarter ended June 2000 till September 2008, it said that all those financial statements were prepared by the management.
The company further said that it relied 'on management controls over financial reporting, and the information and explanations provided by the management, as also the verbal and written representations made to us during the course of our audits.'
Earlier on January 7, the then Satyam Computer chairman Ramalinga Raju had stated that the financial statements of the company have been inaccurate for successive years.
In view of Ramalinga Raju's letter, PwC said, "We hereby, in accordance with the guidance note, state that our audit reports and opinions in relation to the financial statements for the audit period should no longer be relied upon."
The audit firm further added: "The contents of the said letter, even if partially accurate, may have a material effect (which effect is currently unknown and cannot be quantified without a thorough investigation) on the veracity of the company's financial statements presented to us during the audit period.
Consequently, our opinions on the financial statements may be rendered inaccurate and unreliable."
In accordance with the Generally Accepted Accounting Standards in the US, PwC said, "We advise that the board of directors of the company should . . . commence an independent investigation pursuant to section 10A of the United States Securities and Exchange Act . . . to determine whether such illegal acts occurred and if so their nature and extent."
"We wish to advise that the company should promptly notify any person or entity that is known to be relying upon or is likely to rely upon our audit report that our audit opinion should no longer be relied upon."
On Tuesday, Andhra Pradesh Police had conducted searches at the offices of PwC, in Hyderabad.