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Satyam is undoubtedly one of the largest accounting frauds in the history of South Asia.

Happening at a time when the entire world is in the midst of one of the worst recessions in the last 100 years or so, it raises some serious questions about the state of Corporate Governance in South Asia. For accounting profession, the more relevant issue is the role played by the external auditors of Satyam, which in this case was a major accounting firm.

Satyam in Pakistan
Can a similar situation like Satyam happen in Pakistan? Satyam has happened many times over in Pakistan. How can people forget the Crescent Standard Bank scandal, the Taj Company fiasco, Schon Group of Companies, the Samad Dadhabhoy and the Double Shah Ponzi scheme, to name just a few. Of course, we must also not forget the financial scams relating to the cooperatives societies, Mehran and Indus Banks and NDFC debacles. Then, there are obvious candidates in the waiting which, if it were in any other country of the world, would have had upended a long time ago rather than being a constant drain on the national budget and the taxpayer's money. Some of the issues raised by financial analysts and observers regarding Satyam and other scandals could apply to businesses in Pakistan:  Stake held by family insiders falls, they have an incentive to rip off other shareholders by siphoning off money.  Significant untaxed agricultural income and expected high returns.  Rules play no role in stopping senior financial executives from producing fictitious numbers.  Personal investments generally, and particularly in the real estate sector, by siphoning off money from the public institution.  Under pressure to show extraordinary results in order to survive.  Laws relating to transactions with related companies, businesses and individuals The fact remains that there is a thriving black economy in the country that provides avenues that promise higher returns than the market rate. There are enough businesses out there to take this money and use it to fill in the gaps. Then there is a concerted belief that rules and regulations must be broken to achieve success. In our own context, the pertinent question is whether Pakistan is also at risk of such accounting frauds happening without being detected by the board of directors as well as the auditors. While there can be no system in the world that can be 100 percent secure against the risk of frauds, the most important firewall against such frauds happening is the state of Corporate Governance, and within this, the integrity of its key components, including board of directors and auditors.

and particularly the assessment of the business ethics followed by a business. In my personal opinion. then we should not be seen as the advocates of transparency. to aid and abet bad or unethical business practices. particularly resulting in off the books transactions. where I feel more confident of this risk being low is the state of audit profession. I had the privilege of reviewing the comparative state of Corporate Governance in South Asian Countries. I am of the view that on an overall basis. disclosure and presentation issues. the time has come for auditors. to go beyond the exercise of verifying the accuracy. it is difficult to say whether a scam such as Satyam's can be completely avoided in any part of the world. Even in the presence of detailed legislation and reporting frameworks. the role of executive. In my opinion. It is a time for change. . and on this basis. the state of Corporate Governance in Pakistan is not very different from that of India. based on my knowledge and experience of the profession in Pakistan over the last 28 years. It is indeed time for reflection and critical self analysis. if we as a profession start looking for ways out. non-executive and independent directors.Due to inherent limitations of businesses as well as audit procedures. Chairman of Corporate Governance Group of South Asian Federation of Accountants. I can confidently say that the possibility of such a large accounting fraud being perpetrated by management and not being detected by a major audit firm over a period of several years would be remote. the possibility of fraud remains. One area. direct or indirect. transparency and due vigilance. the decision making processes. Conclusion The fact is. integrity. in particular. and we do need significant improvements in many aspects of the same. They perhaps will have to go beyond this to examine the state of corporate governance in an organization. unless the people tasked with governance and auditors perform their duties with professionalism. honesty and law and order. Professional accountants and auditors cannot rest assured that the IASs and IFRSs are being followed.