India’s audit regulator is planning to
limit the number of audit firms a network can register in a
post-Satyam shake-up that could have wide implications for the Big
Four. This follows confusion over the extent of different Price
Waterhouse firms’ involvement in India’s largest accounting

At present, global networks such as
PricewaterhouseCoopers have multiple audit firms registered in the
country to overcome Indian laws that restrict the number of
partners a firm may have to 20. There are nine offices in India
affiliated with PricewaterhouseCoopers. These operate in
partnership but they are mostly structured as separate legal

The Institute of Chartered Accountants of
India’s (ICAI) proposal is to allow only two registered audit firms
from the ‘same entity’ This would affect all of the Big Four
networks in their current operating structures.

In India, only one registered firm can sign
off an audit report and this proposal is designed to prevent global
networks from washing their hands of erroneous work that may be
carried out by the signing firm.

Opponents of the ICAI’s proposal argue that
firms will set up new partnerships under different names and the
rules could restrict the ability of large audit firms to serve
their clients, having a detrimental affect on capital markets.

The Indian government recently announced it
could take action within a couple of months against the firms Price
Waterhouse Bangalore, Price Waterhouse New Delhi and Price
Waterhouse Kolkata, four Price Waterhouse Bangalore auditors and
two former Satyam Computer Services employees implicated in the
Satyam accounting scandal.

The auditors are: S Gopalakrishnan and
Srinivas Talluri, who were the former auditors of Satyam; P Siva
Prasad, who was the head of the audit team; and audit team member C
H Ravindranath. They have all been found prima facie
guilty by the ICAI.

India’s Corporate Affairs Minister Salman
Khurshid said action against auditors could include barring but it
is unclear how firms will be punished.

Price Waterhouse said it was only aware of one
auditor who had been tapped on the shoulder by the regulator’s
disciplinary arm.

“Only one of the Price Waterhouse
professionals in question has so far received a notice from the
disciplinary committee of the ICAI seeking his reply to the ICAI
allegations,” the firm said. “This is the beginning of the
disciplinary committee’s process for the recipient alone, not the
end of it as characterised in some reports.”

Price Waterhouse labelled the ICAI’s reference
to its offices in Kolkata and New Delhi as surprising and

“Neither of these firms had anything to do
with the Satyam audit nor have they received so far any notice from
ICAI alleging misconduct by them. As the ICAI knows, the Price
Waterhouse firm registered in Bangalore audited Satyam’s financial
statements,” the firm added.