Satyam Scam: SEBI Bans Price Waterhouse For 2 year
By: Tax Hunts
January 11, 2018
On Wednesday, SEBI found PWC guilty in the Satyam scam and therefore; suspended its network entities from engaging in audit work with any listed company in India for 2 years; for its role in Rs 8,000-crore Satyam scam that took place in 2009. The ban will come into effect from the FY 2018-19 and won’t affect the auditing work for the year 2017-18.
Satyam Scam: SEBI bans Price Waterhouse for 2 years
SEBI found the audit firm guilty in the nine-year-old Rs. 7,136 crore Satyam Computer Services Ltd scam. In its 180-page order, the market regulator held that the firm was complicit with the main perpetrators of the accounting fraud & did not comply with auditing standards.
SEBI has also ordered Price Waterhouse Bangalore and its two partners – S. Gopalakrishnan and Srinivas Tallurito to pay Rs 13.09 crore; along with interest at 12% per annum from 7th January 2009 till the date of payment. They have to pay the amount within 45 days. They have also been banned from issuing audit certificates to any listed companies for 3 years. The two chartered accountants were responsible for auditing Satyam when the fraud came to knowledge. The order came 9 years after the scam at Satyam Computer Services first came to light and has been passed under the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) regulations & Section 11 of SEBI Act which empowers it to give directions in the interest of investors.
Price Waterhouse Network said in a statement, “We are disappointed with the findings of the Sebi investigations & the adjudication order. The Sebi order relates to a fraud that took place nearly a decade ago in which we played no part & had no knowledge of. 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. We believe that; the order is also not in line with the directions of the Honorable Bombay High Court order of 2011 and; so we are confident of getting a stay before this order becomes effective.”
PW is referring to an August 2010 order of the high court where it had ruled that; no directions can be issued against them if; there is only some omission without proof of connivance and intent to fraud. The PW statement also said that they have learned the lessons of Satyam & invested massively over the last 9 years in building a robust and high-quality audit practice, as also confirmed by an independent monitor appointed by the US SEC in 2015.
The regulator’s objective was to prove fraud of PW partners with the promoters of Satyam in fudging the company’s books. Consequently, PW had moved the Supreme Court challenging SEBI’s jurisdiction & authority in starting an investigation against the audit firm. The apex court allowed SEBI to go ahead with its investigations.
SEBI found that certain directors & employees of Satyam Computer Services had connived and co-operated in the overstatement, falsification, fabrication, and misrepresentation in the books of account & financial statements of the company.
The regulator said that the objective of insulating the securities market from such fraudulent accounting practices; performed by an international firm of reputation would be ineffective; if the directions do not bring within its sweep the brand name PwC.