Price Waterhouse To Challenge Audit Ban in India
Securities and Exchange Board of India banned auditing firm Price Waterhouse for two years over Satyam Computer scam.
Price Waterhouse (PW) is set to challenge the two-year auditing ban imposed on it by the Securities and Exchange Board of India (SEBI) on Jan. 10, Reuters reported. The Corporate Affairs Ministry (MCA) will examine SEBI’s order, Union Minister PP Chaudhary said on Jan. 11.
As per SEBI’s 108-page order, Price Waterhouse was complicit with the main accused in the nine-year-old Rs 7,136 crore Satyam Computer Service Ltd. scam and did not comply with auditing standards. The firm told the news agency that it was “disappointed” with the order.
“We are disappointed with the findings of the SEBI investigations and the adjudication 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,” a spokesperson at the accounting firm said, Reuters reported.
The ban stipulates that PW and the firms in its network (PWC India) cannot audit listed companies and intermediaries for two years. However, the audits undertaken for financial year 2017-18 would not be affected.
The Price Waterhouse network is made up of 11 chartered accountancy firms with about 3,000 employees, and has around 75 listed companies as clients.
There was no “intentional wrongdoing by PW firms in the unprecedented management perpetrated fraud,” Price Waterhouse said in a statement. The firm added that it had “learnt the lessons of Satyam” and brought in high-quality audit practice.
“As we have said since 2009, there has been no intentional wrong doing by PW 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 Hon’ble Bombay High Court order of 2010 and so we are confident of getting a stay before this order becomes effective,” the spokesperson added, referring to the August 2010 High Court order that ruled that no direction can be issued against PW if there is only some omission without proof of connivance and intent to fraud.
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.
SEBI ordered Price Waterhouse, Bengaluru, and two of its former partners to jointly forfeit “wrongful gains” of about Rs 131 million plus interest within 45 days.
The fraud surfaced in January 2009 when B. Ramalinga Raju, the then chairman of Satyam Computer Services Ltd., admitted in a letter to the company’s board and stock exchanges to have inflated revenue and profit over several years. The Rs 7,136 crore fraud remains one of India’s biggest scams.
PW was the auditor of the company between 2000 and 2008. As per SEBI, it showed total disregard for stipulated auditing practice, which showed its complicity in the manipulation.