Satyam scam: SEBI bans PwC from auditing listed firms for 2 years

Satyam scam: Sebi bans Price Waterhouse entities from issuing audit certificates for two years

Price Waterhouse will contest a two-year auditing ban by Securities and Exchange Board of India (SEBI) over a fraud almost a decade ago at a company it audited, but even if it succeeds in preventing the move Indian business experts expect damage to the auditor's business. However, to avoid operational difficulties, SEBI has not stopped the ongoing assignment of PwC India.

In India, all audit functions within the group are conducted under the PwC brand, with a network of local firms operating under the banner.

The board also ordered PwC and two former partners who worked on Satyam's accounts - S Gopalakrishnan and Srinivas Talluri - to repay over Rs 130 million ($2 million) of wrongful gains. The regulator also found that the audit firm relied on documents that the company had shared, and these included fixed deposit statements, and other bank details.

Price Waterhouse, the auditing arm of consultancy firm PwC India, is the auditor for 77 companies listed on National Stock Exchange of India, according to data from Prime Database.

"Listed companies and intermediaries registered with Sebi shall not engage any firm forming part of the PW network for issuing any certificate with respect to compliance of statutory obligations which Sebi is competent to administer and enforce, under various laws for a period of two years", Sebi said in its 108-page order. "Their interests are fully protected and we are hopeful of a positive verdict when we appeal against the Sebi order", said a senior PW executive.

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Price Waterhouse has, expectedly, rejected the charges brought out against it by Sebi while expressing its disappointment on the ban.

In its order, SEBI said while PwC's "loose-knit network arrangement" enabled partner firms to derive the advantage of its global brand value but did not lay down any supervisory mechanisms to check the quality of the performance of the firms. "They [Price Waterhouse] got their audits for years beyond March 2018 and if they manage to get a stay, the matter ends there", said Amarjeet Chopra, former president of the Institute of Chartered Accountants of India. The firm said it was "disappointed" by Sebi's move and said it "played no part and had no knowledge of" the fraud. "We believe that the order is also not in line with the directions of the Honourable Bombay High Court order of 2010 and so we are confident of getting a stay before this order becomes effective", The Times of India quoted the spokesperson of the firm in an emailed response.

The strict action came nine years after the Satyam scam came out.

The Satyam fraud, one of the biggest financial frauds in the country, came to the fore in the year 2009, when its's founder Ramalinga Raju admitted and confessed before market regulator SEBI about large-scale financial manipulations in the account books of Satyam Computer Service Ltd.

The show-cause notices were issued to a total of 13 entities and it was alleged that certifying the financial statements of Satyam Computer Services for the period from 2000 to 2008, they acted in violation of the duties as auditors.

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