New charges in the Satyam scandal were laid by India’s Central Bureau of Inves­ti­gation, for “creating fake invoices to inflate revenues by US$94 million and forging company board resolu­tions to obtain unautho­rised loans worth US$265 million” according to this story in Accoun­tancy Age.

This comes after charges were laid on November 21 against the former Head of Internal Audit, VS Prabhakar Gupta, for the company, for “willful suppression of auditing irregularities.”

A lot of coverage in the blogs (primarily Dennis’ and Francine’s) thus far has focused on the role the external auditor Price­wa­ter­house­C­oopers played in the fraud, but Internal Audit arguably should’ve been better able to root out the fraud due to its closer famil­iarity with business processes.

It’s difficult to detect fraud in the best of circum­stances, but when the charges involve suppression of irreg­u­lar­ities discovered by internal audit, questions will be raised (and arrests made).

DNA (Daily News & Analysis), an Indian English language newspaper, provided additional detail on the arrest of the former Head of IA:

While the spokesman refused to divulge any further infor­mation about Gupta, sources in the agency claimed that the auditor had helped in falsi­fying accounts including inflating the overseas employees pay bill.

On top of this, the Internal Audit department received the Recog­nition of Commitment from the Institute of Internal Auditors in 2005, which according to the IIA was “available to all internal audit activ­ities that submitted an appli­cation fee and met specific criteria in the areas of quality, outreach and profes­sion­alism, based on a point system.” The program was discon­tinued in 2006.

On the occasion, the now former Head of IA had this to say:

We are extremely happy with the recog­nition that our Internal Audit team has received on an inter­na­tional platform. Satyam is one of only 26 internal audit depart­ments worldwide receiving this award in 2005 and it reinforces our commitment to meet the inter­na­tional standards in the concepts and approaches to audit function contributing to better corporate governance.

Satyam is now commonly referred to as India’s Enron.