PwC’s Indian member firm, PW India, is suing
Satyam and its former management for more than INR1bn ($19m) in
compensation and damages caused by India’s largest corporate
fraud.
The firm is incensed over Satyam’s attempt to
shift the blame onto PwC after Satyam founder B Ramalinga Raju
confessed he overstated the company’s profits and created a
fictitious cash balance of more than $1bn in January, 2009.
The subsequent negative press caused by the
scandal is likely to have caused reputation damage for PwC but the
auditor’s lawsuit is also in response to a lawsuit Satyam filed
against its former board members and PW India only a couple of days
ago. Current Satyam chairman Vineet Nayyar accused the former
auditors of colluding with the former management in the fraud.
PW India viewed Satyam’s lawsuit as a crude
attempt to blame auditors for the crimes of management and has hit
back with its own legal claim.
“PW India is outraged that Satyam is
attempting to shift responsibility to the auditors for the
consequences of a carefully and deliberately concealed fraud that
was undertaken at the direction of its own senior management,” the
firm said.
“The fraud perpetrated by Satyam was
specifically designed to – and did – circumvent Satyam’s own
internal controls and PW India’s audit process, and consequently PW
India was a victim of Satyam’s fraud, and will defend itself
vigorously against Satyam’s baseless contentions.”
PW India is yet to receive punishment from
Indian authorities although it has been reprimanded by the US
regulator and audit authority.
The US Securities and Exchange Commission
ordered PW India to pay $6m in fines while the US Public Company
Accounting Oversight Board dished out a penalty of $1.5m for
violations in connection to the Satyam audit in April
2011.
Individuals at PW India have been punished by
the Institute of Chartered Accountants of India.
Former PwC partner Talluri Srinivas was found
guilty of professional misconduct last week and is due to be
punished this week. Two audit managers from PW India affiliate
Lovelock & Lewes, C Ravindranath and P Sivaprasad, received a
lifetime ban from auditing as well as fines of INR500,000
($9,706).
