PricewaterhouseCoopers, the accounting firm that was supposed to audit the financial results at Satyam Computer Services, has finally broken its silence. Apparently, everything is actually fine.
A story on Thursday by Jackie Range and Scott Patterson in the Wall Street Journal, quoted the company in a statement sent by email as saying, “`The audits were conducted by Pricewaterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence.’ It said it is cooperating with regulators.”
Clearly that statement does not square with the massive, multiyear fraud Satyam’s CEO has admitted to. PCW’s job was to prevent such a fraud, and the investigation will bring its shortcomings to light. PCW will probably be sued. That’s what happens when auditors don’t do their job. Regardless, its highest priority now should be to save what is most valuable — its brand – by demonstrating it has integrity and can be trusted.
The steps to do that are basic crisis communications 101:
• Apologize for what is clearly a shortcoming on PCW’s part, particularly to the Satyam shareholders
• Reassure it’s own customers and the public that it will identify the problem quickly and fix it
• Ask for help from peers and regulators in the process
• Relentlessly (daily) report on the progress of this investigation until no one wants to listen anymore
While everyone agrees that this is the way to handle crisis communications, few companies can see their way past the organizational panic a scandal like this causes, to do so. Satyam has appropriately been called the Indian Enron; it will be interesting to see what parallels can also be drawn between the communications “strategies” of the auditors who failed to detect these frauds. In the 2001 Enron scandal it was Arthur Andersen that was doing the seal talking.
Do the Right Thing
Enron announced that the SEC was investigating its accounting practices on Oct. 22, 2001. On Nov. 29 the SEC announced it would begin investigating Arthur Andersen. According to a search on BusinessWire and PR Newswire (the Arthur Andersen site is no more) it wasn’t until Nov. 30, more than a month after the scandal was public, that Andersen issued a public statement.
That release simply said that Deloitte & Touche would expand the scope of its peer review (accounting firms doing routine, voluntary reviews of other accounting firms), which had been going on for eight months, to include other offices, including Houston (Enron’s headquarters).
“In light of recent developments, we believe that extending the peer review to include work done in other offices, including Houston, and other procedures that Deloitte & Touche deems appropriate and necessary is the right thing to do,” CEO Joseph Berardino said in the release.
Issues are Broad and Complex
That bold declaration of leadership was followed on Dec. 4 by a joint release from the Big Five accounting firms — Andersen, KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst & Young – that is as desperate, obtuse and evasive as any I’ve ever read. The first three paragraphs:
“As with other business failures, the collapse of Enron has drawn attention to the accounting profession, our role in America’s financial markets and our public responsibilities. We recognize that a strong, diligent, and effective profession is a critically important component of the financial reporting system and fundamental to maintaining investor confidence in our capital markets. We take our responsibility seriously.
The issues are broad and complex. When businesses fail and public confidence wanes, all involved in the capital markets have a responsibility to actively seek to understand the core problems and pursue meaningful solutions. We encourage other market participants to engage in self-scrutiny and take significant steps.
Working together, our five firms are committing our attention and resources to evaluate and chart a course to address issues important to investors. We are also committed to future action based on insights gained from current events.”
When you have to emphatically say “We take our responsibility seriously” in the first paragraph, it’s a good sign that your actions probably aren’t supporting that claim. If PCW has the stomach to take the PR hit up front, level with the public and find the problems that caused the Satyam meltdown, it could save itself and discover that the press release can be a company’s best friend in a crisis.
