In what could be in its toughest stand against one of the top four accounting firms in the country, the Securities and Exchanges Board of India (SEBI) held PricewaterhouseCoopers (PwC) guilty in the Rs 8,000 crore Satyam Computer scam and has banned the firm from doing audit work for any listed company for two years.
"Entities/firms practising as chartered accountants in India under the brand and banner of PW shall not directly or indirectly issue any certificate of audit of listed companies, compliance of obligation of listed companies and intermediaries registered with SEBI for a period of two years," stated the order passed by G. Mahalingam, whole time member of SEBI.
Also two former PwC partners—S. Gopalakrishnan and Srinivas Talluri—have been barred from directly or indirectly issuing any audit certificate of listed companies for three years.
Further, PwC and the two former partners have also been asked to pay Rs 13.09 crore along with interest at 12 per cent per annum from January 2009. The amount has to be paid within 45 days from the date of this order.
PwC says it is disappointed with the SEBI findings and the adjudicating order. "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. As we have said since 2009, there has been no intentional wrongdoing by PwC firms in the unprecedented management perpetrated fraud at Satyam, nor have we seen any material evidence to the contrary. 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," PwC said in response to the SEBI order.
SEBI had received an email dated January 7, 2009, from B. Ramalinga Raju, then chairman of Satyam Computer Services, admitting large scale manipulations in the books of account of Satyam Computer. PwC was the statutory auditor of the company from April 1, 2000.
Among other things, Raju's email had stated, Satyam Computer's balance sheet for the quarter ended September 2008 had reflected cash and bank balances worth Rs 5,361 crore, of which Rs 5,040 crore were non-existent. It had also mentioned inflating profits over several years.
SEBI's investigation found that certain Satyam directors and employees had connived and collaborated in the overstatement, fabrication, falsification and misrepresentation in the books of account and financial statements of Satyam Computer. The published books of account of the company contained false and inflated current account bank balances, fixed deposit balances, fictitious interest income revenue from sales and debtors’ figures and for several years.
The investigation also noted that the statutory auditors of Satyam Computer had connived with the directors and employees of the company in falsifying the financial statements.
While SEBI's order barring PwC for two years comes into immediate effect, it will not impact any audit assignments for financial year 2017-18 undertaken by PwC network firms, for "removal of operational difficulties."
PwC further stated that it has "learnt the lessons of Satyam and invested heavily over the last nine years in building a robust and high quality audit practice, as also confirmed in 2015 by an independent monitor appointed by the US SEC (Securities and Exchange Commission)."
