The Securities and Exchange Board of India(Sebi) has banned Price Waterhouse (PW) and entities in its network from auditing listed companies for a period of two years, after finding it guilty in the Rs 7,136 crore Satyam scam of 2009.
In its order, Sebi held that PW did not comply with auditing standards and was complicit with the perpetrators, reported Hindustan Times.
“In this context, the long period during which the falsification of account books took place, without the same drawing the attention of PWCIL or other PW entities in India, points to a systemic problem in the audit processes carried out by the PW entities,” said SEBI, reported the Economic Times.
The order states that PW and audit firms in its network cannot issue audit certificates directly or indirectly, but it will not impact the audits taken up for the 2017-18 financial year.
According to Livemint, PW and its senior partners S Gopalakrishan and Srinivas Talluri have to relinquish “Rs 13,09,01,664 with interest calculated at the rate of 12 per cent per annum from January 7, 2009 till the date of payment”.
Gopalakrishnan and Srinivas had certified Satyam’s audit reports from 2000-08.
The order has been passed under the Prevention of Fraudulent and Unfair Trade Practices regulations and Section 11 of Sebi Act, Livemint added.
“We are disappointed with the findings of the Sebi investigations and the adjudication order… we are confident of getting a stay before this order becomes effective,” a PW spokesperson told Financial Express.
“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,” PW said in a statement.
Satyam case background
The top management of Satyam Computer Services dressed up their accounts, balance sheets and profit margins to show a rosy picture of the company, in an effort to get more investments from the public.
Fixed deposit receipts of many banks were forged for the same purpose.
They consistently did this over a period of six years - from 2003 to 2009.
Additionally, they also prepared over 7,561 fake invoices, fake clients and fake projects.
They even recruited more and more people to show that the "growing" company was in need of more staff.
Their plan crashed when the company could not pay its employees their salaries.
On January 7, 2009, Satyam’s chairman Ramalinga Raju admitted his guilt and wrote a letter of confession to the employees. He was convicted in 2015.