Former Satyam audit firm Price Waterhouse is to set up an
independent review board to provide external guidance on the firm’s
audit quality to reassure clients as Indian authorities continue
investigating the firm’s former audit partners.

The Satyam Computer Services scandal unfolded in January when
financial irregularities totalling about $1.44 billion were
discovered at the Indian software company. Price Waterhouse, an
Indian member firm of PricewaterhouseCoopers (PwC), was Satyam’s
statutory auditor at the time the irregularities allegedly took
place. Satyam has subsequently ditched Price Waterhouse as its
auditor.

The review board will be made up of four members from outside
the PwC network and a senior partner from another PwC firm.

Price Waterhouse’s Hyderabad office has been placed under new
management and the two key Satyam audit partners were suspended
from duty in January.

Price Waterhouse chief relationship partner S Gopalakrishnan and
engagement leader Srinivas Taluri have been detained by Indian
police in connection to the Satyam fraud since January. They are
understood to be in the custody of the Indian Central Bureau of
Investigation until 17 March. Price Waterhouse chairman Ramesh
Rajan said while he was confident in the overall quality of the
firm’s services and its staff, the problems at Satyam have created
a difficult environment.

As part of the review process, the firm has appointed a new head
of quality assurance and risk management, who has been seconded
from another PwC firm. In addition, Sharmila Karve is to take over
as the new leader of its national assurance practice.

The scandal has also led the Institute of Chartered Accountants
of India (ICAI) to consider changes to the audit profession
including the use of joint auditors, auditor rotation and a review
of links between multinational accounting firms and their local
affiliates. A five member ICAI panel has been convened to discuss
the changes and was due to report back on 10 March. No further
details had emerged at the time this publication went to print.

Nicholas Moody