A US$1 billion fraud at outsourcing firm Satyam Computer Services, dubbed 'India's Enron', has shaken investor confidence in the world's Big Four accounting firms, which have expanded rapidly in Asia despite a general shortage of qualified accountants.

Ramalinga Raju, founder and chairman of India's fourth-biggest software services exporter, resigned on Wednesday saying profits were falsely inflated for years.

'This is shocking. I can't even let my thoughts go in the direction that there is another Satyam somewhere,' said Shailesh Haribhakti, executive chairman of BDO Haribhakti, a consulting and management services firm based in Mumbai.

'I have very high respect for PricewaterhouseCoopers (PwC) who are their auditors, but it's incredible that such gross things existed and were not discovered,' he said.

PwC said it was examining Mr Raju's five-page resignation letter and declined further comment, though one insider said the accountant was as shocked as anyone at the admission of years of financial deception at Satyam.

PwC staff in Asia said they had received internal e-mails yesterday telling them not to discuss Satyam publicly.

'We are also shocked by the Satyam news and many of our colleagues and managers describe it as India's Enron, so you can imagine how big the impact will be to us,' one PwC employee told Reuters on condition of anonymity.

PwC accelerated its Asia expansion in 2002 when it took over offices and staff from Arthur Andersen, which was auditor for Enron and once one of the 'Big Five' global accounting firms, along with PwC, Ernst & Young, Deloitte & Touche and KPMG.

Like its three big rivals, PwC has grown rapidly across Asia, particularly in China and India, recruiting thousands amid fierce competition for talent.

Frank Lyn, PwC's Beijing-based China markets leader, told Reuters in November that a shortage of talent was the firm's top challenge in China.

It can take three to five years to groom a fresh graduate at a major firm like PwC to the level of senior associate, who can meet clients directly for accounting services.

But firms in busy markets have sometimes fast- tracked new hires in services that can be beyond their professional level.

Sharmila Gopinath, research director at the Asian Corporate Governance Association here, said accounting firms face a lack of qualified people at all levels in Asia.

'Sometimes people, especially at the top, find themselves stretched at certain levels, especially when it comes to supervision of work,' she said.

'While the Big Four work in places like India, China and Malaysia within the local context, they have a global standard which they must adhere to. Yet, the local rules can be vastly different and time-consuming to comply with,' she added.

David Legg, managing director at Gerson Lehrman, a consulting firm specialising in private equity investments, said the Satyam case was a warning that investors should not rely exclusively on financial due diligence by accountants for deal-making decisions.

Gerson Lehrman says it provides 'double-check' and in-depth research services for many private equity investors who also hire the Big Four for regular due diligence.

When markets turn bad and corporate frauds are more easily exposed, private equity firms like Blackstone and Carlyle seek additional channels to verify their investment portfolio or deal targets, Mr Legg noted.

'For clients engaged in higher risk activity, we put in experienced staff. If we don't have experts at home, we have a system in which we have support and back- up from overseas offices of KPMG,' said Park Young Jin, risk management partner of KPMG Samjong Accounting Corp in Seoul.

'If we are unable to make or handle a normal audit because of high auditing risks, we stress our principle of rejecting such auditing work, or expressing 'no comment',' he added. -- Reuters