Satyam case: Sebi bans PwC entities from auditing listed firms for two years

The order comes nine years after the scam at Satyam Computer Services came to light and after two failed attempts by PwC to settle the case through the consent mechanism.

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The order comes nine years after the scam at Satyam Computer Services came to light and after two failed attempts by PwC to settle the case through the consent mechanism.
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Finding PwC guilty in the Satyam scam, India’s capital markets regulator on Wednesday barred its network entities from issuing audit certificates to any listed company in India for two years.
SEBI also ordered the disgorgement of over Rs13 crore of wrongful gains from the auditing firm and its two erstwhile partners who worked on the IT company’s accounts. The order comes nine years after the scam at Satyam Computer Services came to light and after two failed attempts by PwC to settle the case through the consent mechanism.
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A 108-page order imposes a two-year ban on entities/ firms practicing as chartered accountants in India under the brand and banner of PW from directly or indirectly issuing any certificate of the audit of listed companies, compliance of obligations of listed companies and intermediaries registered with the regulator.
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Sebi noted that the order would not impact audit assignments relating to the fiscal year 2017-18 undertaken by the firms forming part of the PwC network. Besides, 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 “Rs13,09,01,664 with interest calculated at the rate of 12 per cent per annum from January 7, 2009 till the date of payment”. They have to pay the amount within 45 days.
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Further, Gopalakrishnan and Talluri have been restrained from directly or indirectly issuing any certificate of audit of listed companies, compliance of obligations of listed companies and intermediaries registered with Sebi for three years.
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After consent pleas were rejected, PwC had approached the Supreme Court challenging Sebi’s jurisdiction over auditors. The apex court had asked the regulator to expeditiously pass the order in the matter after giving due opportunity, including access to documents, to the parties concerned.
Sebi said the objective of insulating the securities market from such fraudulent accounting practices perpetrated by an international firm of repute will be ineffective if the directions do not bring within its sweep the brand name PwC. 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, the order said.
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“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 Bombay High Court order of 2011 and so we are confident of getting a stay before this order becomes effective,” PwC said in the statement.
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It also noted that the order relates to a fraud that took place nearly a decade ago in which it played no part and had no knowledge of. Further, the statement said that Price Waterhouse Network firms in India has learnt the lessons of Satyam and invested heavily over the last nine years in building a robust and high quality audit practice.