Published: Sun, January 14, 2018
People | By Leon Thompson

India bars PwC from auditing listed firms for two years

Price Waterhouse will contest a two-year auditing ban by the 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.

The 108-page notification stated PwC was party to foul play, and did not comply with auditing standards.

These companies would soon be required to look for new auditors in the wake of the SEBI order even though the regulator has made it clear that the ruling would not impact audit assignments relating to the financial year 2017-18 undertaken by the PW network firms.

The regulator also ordered the disgorgement of over Rs 13-crore wrongful gains from the audit major and its two erstwhile partners - S. Gopalakrishnan and Srinivas Talluri - who had worked on the IT major's accounts.

These include Tata Steel and Piramal Enterprises, which did not immediately respond to requests for comment on the SEBI action.

Analysts say the Sebi order is a big setback for the firm which never quite recovered from the fallout of the case.

The order says the noticees were granted an opportunity by Sebi to conduct an inspection of all the documents collected during the investigation, and PwC entities and the representatives of engagement partners took out separate inspection of records.

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"We are disappointed with the findings of the Sebi investigations and the adjudication order... we are confident of getting a stay before this order becomes effective", Price Waterhouse said in a statement.

Price Waterhouse's Indian arm, PW Bangalore, was Satyam's auditor during this period.

Shares of Satyam were also listed in the US. SEBI added that taking confirmation from the bank directly would have exposed the scam earlier.

After consent pleas were rejected, PW had approached the Supreme Court challenging Sebi's jurisdiction over auditors. "The objective of insulating the securities market from such fraudulent accounting practices perpetrated by an worldwide firm of repute will be ineffective if the directions do not bring within its sweep the brand name PW", the SEBI order said.

The Satyam scandal broke in 2009 when the founder and chairman of Satyam Computers, Ramalinga Raju, confessed to embezzlement and said the company's accounts had been doctored.

Price Waterhouse today said there has been no intentional wrongdoing by its firms in the Satyam case and expressed confidence of getting a stay on the Sebi order. A senior chartered accountant said the impact of the SEBI ruling on the auditing business of PW network firms and others can not be assessed immediately.

The order was passed under the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) regulations and Section 11 of SEBI Act, which empowers the market regulator to pass directives in the interest of investors.

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