India issues two-year audit ban on PwC for Satyam shortcomings

PwC banned from auditing listed companies in India

The Indian authorities said that, from 2003 onwards, Satyam's sales revenues were inflated by accounting for 7,561 fake invoices, and Price Waterhouse failed to check the veracity of the monthly bank statements.

In addition to barring PwC, Sebi has also ordered PwC and its two erstwhile partners who worked on the Satyam audit to pay Rs 130.9 million, along with interest at 12 per cent per annum from January 2009 on account of wrongful gains.

The market regulator held in its 180-page order that the firm was complicit with the main perpetrators of the accounting fraud and did not comply with auditing standards.

The order states that PW and audit firms in its network can not issue audit certificates directly or indirectly, but it will not impact the audits taken up for the 2017-18 financial year.

The ban will be effective from the financial year 2018-'19 and will not affect auditing work for 2017-'18, the report said. "The Sebi order relates to a fraud that took place almost a decade ago in which we played no part and had no knowledge of", the accounting firm's spokesperson said in an emailed response.

Troubled audit firm Price Waterhouse's plans to seek a stay order against the Indian regulator's ban on its local audit affiliates over the Satyam fraud case are likely to create uncertainty for the 75 listed companies it audits, including Tata Steel and Hindalco Industries.

In September 2017, Price Waterhouse had moved a consent plea with SEBI to settle the investigations related to its role in the Satyam scam. The firm showed disregard for stipulated auditing practices, such as independently verifying the company's bank statements, Sebi said. "If auditing is not meant to detect a $1 billion fraud, I wonder what it is for".

Out of this amount, over Rs13 crore was paid towards PW Bangalore for the audit of Satyam Computer Services as submitted by it, the regulator added. According to the Act, an auditor has to be hired for a fixed term of five years and can be reappointed for another five years.

The regulator's objective was to prove fraud or connivance of the PW partners with the promoters of Satyam in fudging the company's books.

In March past year, ruling BJP's Lok Sabha MP Kirit Somaiya posted on Twitter a document, according to which, he demanded action against PwC network for its alleged role in various scams related to Global Trust Bank, Satyam and Vijay Mallya/Kingfisher airlines/UB group. It said it was confident courts would stay the order before it comes into effect. Both chartered accountants were in charge of auditing Satyam when the fraud came to light.

PwC now audits more than 75 Indian companies covered by the order, and around 3,000 PwC employees could be affected, a source familiar with the matter told CNNMoney. The apex court allowed Sebi to go ahead with its investigations.

The Sebi order also asked Price Waterhouse, Bengaluru, and two senior partners-S.

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