India bans Price Waterhouse from auditing listed firms for two years

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Price Waterhouse will contest a two-year auditing ban by Securities and Exchange Board of India (SEBI) over a fraud almost a decade ago at a company it audited, but even if it succeeds in preventing the move Indian business experts expect damage to the auditor's business.

The regulator had also asked PW to pay Rs 13.09 crore, along with annual interest at 12% from January 2009.

Price Waterhouse had moved a consent plea with SEBI in September 2017, to settle the investigations regarding its role in the Satyam scam, after SEBI rejected its former consent plea in 2009.

Is it one of the top professional services firms in the world and belongs to the category of the "Big Four Auditors", the others being Deloitte, Ernst & Young, and KPMG.

PwC has already announced that it is seeking a stay of the order before it becomes effective.

Price Waterhouse was Satyam's auditor during the period in which the fraud was perpetrated. The two chartered accountants were responsible for auditing Satyam when the fraud came to light. This resulted in a series of corporate governance overhauls including setting up of a committee by the CII, tightening of screws on role of audit committees and stricter provisions in the Companies Act, 2013.

Late Wednesday evening, PW issued a statement saying, "We are disappointed with the findings of the Sebi investigations and the adjudication order".

Price Waterhouse Network is auditing arm of PWC India.

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Two former PW partners, S Gopalakrishnan and Srinivas Talluri, have also been barred from issuing audit certificates to listed companies for three years. The network structure of operations adopted by the global 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.

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.

Sebi said the order would come into force with immediate effect.

The PricewaterhouseCoopers affilated firm directly involved in the scandal and its partners were also held jointly and severably liable for Rs13,09,01,664 (USD 2 million), representing the audit fees plus interest.

According to Sebi, it needs to be borne in mind that PW firms have benefited from the relationship from Satyam Computer Services by having collectively received a fee of over Rs23 crore during 2000-2008 period.

"We have however 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) and PCAOB (Public Company Accounting Oversight Board)", Price Waterhouse added.

The Satyam scam was unearthed in 2009, after the then Chairman of Satyam B Ramalinga Raju admitted in a letter to overstating the company's assets by Rs5,040cr.

A senior chartered accountant said impact of the Sebi ruling on auditing business of PW network firms and others can not be assessed immediately.