The Securities and Exchange Board of India (SEBI) has banned PricewaterhouseCoopers (PwC) from conducting audit procedures of listed companies in India for the next two years. The announcement was made after an investigation was done on the auditing firm with respect to the almost-decade-old Satyam scandal.
The scam which had the noted software services company swindle money by accounting fraud is termed as one of the biggest corporate scandals that India has seen. PwC were the auditors of the company during the period of fraud.
In January 2009, Ramalinga Raju, the founder and former chairman of Satyam Computer Services came clean about the wrongdoings of the company. Raju admitted inflating the earning and assets of the company for some years. The software services exporter had siphoned an amount of $1 billion and is looked upon as a case of “India’s Enron”.
On Wednesday, SEBI announced that PwC along with any of its entities or practicing firms shall not issue any certificate of the audit to any listed companies of any of its intermediaries. The ban spans for two years and no association directly or indirectly shall be made during this period.
In a 108-page order, SEBI stated: "The network structure of operations adopted by the international accounting firm should not be used as a shield to avoid legal implications arising out of the certifications issued under the brand name of the network."
In India, the local firms and practitioners perform all the auditing functions of the group under the Price Waterhouse (PW) brand. The functions of consulting, tax advisory and other businesses are handled by the broader PwC entity.
"The SEBI order relates to a fraud that took place nearly a decade ago in which we played no part and had no knowledge of," Price Waterhouse stated in a release.
"There has been no intentional wrongdoing by PW firms in the unprecedented management perpetrated fraud at Satyam, nor have we seen any material evidence to the contrary," PwC added.
The MNC said it was sure of getting a stay order from the court before the ban comes into effect.
SEBI ensured that no panic situation is caused by affirming that the ban will not impact the audit assignments of F.Y. 2017-18. This will evade any operational hindrances to all those firms who’ve undertaken work on behalf of the PwC network.
SEBI has also directed the Bangalore branch of PwC along with two of its erstwhile partners to pay back a sum of 131 million rupees ($2.06 million) plus interest within 45 days, which they had wrongfully gained.
In April 2010, IT firm Tech Mahindra of the Mahindra conglomerate had purchased the control of Satyam in an auction.
In order to settle the U.S. probes into this accounting fraud, Satyam and PricewaterhouseCoopers reached an agreement to pay $17.5 million jointly.
Information source: huffingtonpost
Title image source: time