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

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

With SEBI barring all all the firms in the Price Waterhouse network from auditing listed companies for two years, the verdict is undoubtedly going to send shockwaves in auditing circles.

Price Waterhouse Bangalore and its two erstwhile partners - S. Gopalakrishnan and Srinivas Talluri - have been directed to jointly and severally disgorge the wrongful gains of "Rs 13,09,01,664 with interest calculated at the rate of 12 per cent per annum from January 7, 2009 till the date of payment".

Sebi said PW firms benefited from the relationship with Satyam Computers by having collectively received a fee of Rs 23.31 core during 2000-08.

The order comes into force with immediate effect.

SEBI has said its order will not impact the audit assignments relating to the fiscal year 2017-18 undertaken by the firms forming part of the PwC network.

Price Waterhouse had earlier approached the Supreme Court challenging Sebi's jurisdiction over auditors.

Late on Wednesday, Price Waterhouse responded to the regulator's ruling, saying it was "disappointed".

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SEBI had in February 2009 issued a show-cause notice to Price Waterhouse, among other entities, after it emerged that Satyam's accounts were falsified.

The order related to a fraud that took place almost a decade ago in which it played no part and had no knowledge of, it said.

"As we have said since 2009, 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", Price Waterhouse said in a statement.

The Satyam scam arose when Ramalinga Raju, founder of the erstwhile Satyam Computer Services Ltd, admitted that he had padded the books of the software services giant for several years by nearly Rs 7,000 crore.

The Wall Street Journal reported that PwC was in charge of auditing Satyam's accounts at the time its founder, B. Ramalinga Raju, admitted that he had boosted revenue by forging bank documents and inflating sales figures.

Coincidentally, SEBI order has come in the same month as the then Satyam chief Ramaliga Raju's admission of guilt to SEBI on January 7, 2009. The company was bought by Tech Mahindra, another outsourcing company.

Shares of Satyam were also listed in the US. It doesn't include 2017/18 audits for listed companies which are already in progress. The public had no reason to believe that the audit reports were false and misleading. 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.

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