The Indian markets regulator has barred all of PricewaterhouseCoopers member firms in the country from issuing audit opinions to any listed company in the country for two years on Wednesday, as a result of its nine-year investigation of India’s biggest ever fraud, Satyam.
PwC and its two partners are required to pay 13 million rupees, about $2 million, within 45 days, according to the order from the Securities and Exchange Board of India.
A spokeswoman for the Price Waterhouse network of firms in India provided this statement:
“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. 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.”
The statement added that the auditor has invested heavily to build a robust and high-quality audit practice.
Ramalinga Raju, Satyam’s founder and major shareholder, admitted he had manipulated the results, including faking more than $1 billion in cash on the company’s balance sheet. In his unexpected resignation letter delivered to the board of directors of the company, Raju said that keeping up with the fraud was like “riding a tiger, not knowing how to get off without being eaten.”
Raju was referring to the challenge of keeping track of the widening gap between the real and the fake numbers in the company’s books, which had become impossible.
The audit firm and its partners were accused of signing off on Satyam’s financial statements, issuing clean audit opinions, despite the fact that the company’s monthly bank statements didn’t match with the company’s daily bank statements and they had accepted confirmations of the balances form company executives instead of the bank itself, as the auditing standards require.
The appeals court found that the firm was not compliant with Indian auditing standards and two of its partners, Subramani Gopalakrishnan and Srinivas Talluri, had certified the faulty Satyam’s audit reports during the period in question.
Price Waterhouse Bangalore, PricewaterhouseCoopers Private Limited, and Lovelock & Lewes – the India firms – and PwC U.S. and PwC International agreed to a $25.5 million securities class action settlement in New York in May 2011. In April of 2011, the U.S. Securities and Exchange Commission and the accounting regulator, the Public Company Accounting Oversight Board jointly issued sanctions and a $7.5 million fine against the PwC India firm.
Satyam was taken over by the Mahindra Group’s IT arm in April 2009 and subsequently merged within Tech Mahindra