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Return to: Home > News > Assurance and Accounting > PwC hit with two year audit ban after decade long fraud battle with Indian capital markets regulator

PwC hit with two year audit ban after decade long fraud battle with Indian capital markets regulator

The Securities Exchange Board of India (SEBI) has barred all PwC members and entities from issuing audit certificates to any listed company in India for two years. The ban is in relation to the Satyam Computer services scam from nine years ago where directors and employees had collaborated in overstating and falsifying account books and financial statements. The ban willl not impact audit assignments for the financial year 2017 – 2018.

Price Waterhouse Bangalore and two former partners S Gopalakrishnan and Srinivas Talluri have been ordered to pay a disgorgement of Rs130.9m (USA $2.05m) for wrongful gains. The disgorgement included interest calculated at 12% per year from 7 January 2009 and must be paid within 45 days.

Further, Gopalakrishnan and Talluri have been banned for three years from directly or indirectly issuing any certificate of audit of listed companies, compliance of obligations of listed companies and intermediaries registered with SEBI.

Previously, PwC had failed on two attempts in 2010 and 2017 to stop the SEBI investigation, firstly arguing that SEBI did not have the same jurisdiction as the Institute of Chartered Accountants of India (ICAI) but as ICAI supported SEBI’s authority the Bombay High Court ruled against PwC. The second attempt was a consent plea to settle the investigations but the Supreme Court gave SEBI extensions to their investigations.

PwC stated that they were disappointed with the findings and the adjudication order. “We played no part and had no knowledge of the fraud that took place nearly a decade ago. As we have said since 2009, there has been no intentional wrong doing by our firms, 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 Hon’ble Bombay High Court order of 2010 and so we are confident of getting a stay before this order becomes effective.”

The 108-page order stated that the entire brand name had to be banned in order to effectively protect the securities market from fraudulent accounting practices perpetrated by an international firm.

The PwC statement concluded: “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 and PCAOB.”

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