No intentional wrongdoing in Satyam fraud: Price Waterhouse

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The SEBI order comes nearly seven years after the U.S. Securities and Exchange Commission (SEC) agreed to a $6 million settlement over charges against Indian affiliates of Price Waterhouse related to deficient auditing of Satyam. While there would be no direct impact, SEBI's ruling could also raise questions about PW network entities' auditing of unlisted and other entities.

PwC expressed disappointment at the findings and said it was confident of getting a stay before the order takes effect.

In its order, SEBI said while PwC's "loose-knit network arrangement" enabled partner firms to derive the advantage of its global brand value but did not lay down any supervisory mechanisms to check the quality of the performance of the firms. "The network structure of operations adopted by the worldwide 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 also restrained Gopalakrishnan and Talluri from directly or indirectly issuing any certificate of audit for listed companies or compliance of obligations for listed companies and intermediaries registered with the market regulator for three years.

The Price Waterhouse network is made up of 11 chartered accountancy firms with about 3,000 employees, and has around 75 listed companies as clients.

The order said that auditor should have applied an attitude of professional skepticism and got carried away by the company's reputation.

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The scam came to light in January 2009 after Satyam Computers then chairman B Ramalinga Raju admitted to large scale financial manipulations in the companys books of accounts.

Besides, the watchdog has ordered disgorgement of over Rs 13 crore wrongful gains by the audit major and its two erstwhile partners who worked on the IT majors accounts.

Out of this amount, over Rs13 crore was paid towards PW Bangalore for the audit of Satyam Computer Services as submitted by it, the regulator added.

The PW statement continued, "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".

PW was the auditor of the company between 2000 and 2008. The public had no reason to believe that the audit reports were false and misleading.

Satyam, which was bought by Indian IT firm Tech Mahindra in an auction in 2010, and PricewaterhouseCoopers agreed in 2011 to pay a combined $17.5 million to settle US probes into the fraud. A senior chartered accountant said the impact of the SEBI ruling on the auditing business of PW network firms and others can not be assessed immediately.

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