SAY you SAY ME - The Auditors

The SAY (Satyam) saga just keeps getting better and better. The CFO claims that the inflated cash balances were handled directly by Raju and he was told to keep his nose out of the business. In the meantime there have been calls for PwC's hide.

PwC of course is the hapless group of auditors who audited Bernie Madoff's feed fund the Fairfield Greenwich Group and now have this sordid tale to add to their list of accomplishments. However I "think" (with an emphasis on the word think) that PwC may not be complicit in this particular case. Here is what I think happened.

1: Raju pledges his SAY shares for a margin loan.
2: Raju takes the margin money and pumps it back into SAY's accounts. Thus the bank balances now show inflated amounts.
3: Raju inflates the Revenue numbers which tie in with actual cash in the bank.
4: The bank's provide valid statements showing cash balances.
5: PwC certifies the cash/bank balances.
6: Raju then siphons off the bank balances and uses it for his nefarious purposes.
7: Raju proceeds to repeat steps 1 through 6 every quarter, each time pledging more and more of his shares. Until
A: He runs out of shares to pledge.
B: Is unable to raise cash any other way, and with quarter-ending coming up is desperate to show that he has money in the bank.
C: He comes up with an ingenious idea, utilize the cash (he is supposed to have) to buy other assets. Since he happens to be the seller he has no problem being paid in fictional cash. The auditor now receives a bank statement showing reduced balances and certifies the same. The cash flow statement shows an outgo due to a financing activity and all is well.
D: Scheme C - collapses and the rest is history.