New Delhi, India : The Securities and Exchange Board of India (SEBI), which is the country’s capital market regulator, has banned ‘big four’ global accountancy firm Price Waterhouse (PwC) from auditing listed companies in the country for two years.
The two year ban order – with immediate effect – was issued after SEBI found that PwC failed to check irregularities in a $1.7 billion auditing fraud at the defunct Satyam Computer Services. SEBi found that the audit firm did not comply with the auditing standards and norms.
The order has been passed under the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) regulations and Section 11 of Sebi act which empowers it to pass directions in the interest of investors.
The SEBI order, which stems from the Satyam scandal of January 2009, bars a total of 11 entities that operate under the PwC umbrella: two PwC entities in Bangalore; two in Calcutta; two in Delhi and one in Chennai; Lovelock and Lewes affiliates in Hyderabad and Mumbai; and two Dalal & Shah firms in Mumbai and Ahmedabad from auditing listed companies in India.
Even though the order comes into force with immediate effect, to avoid operational difficulties, SEBI has not stopped the ongoing assignment of PwC India.
“For removal of operational difficulties, this order will not impact audit assignments relating to the financial year 2017-18 undertaken by the firms forming part of the PwC network,” SEBI said.
SEBI also ordered PwC, Bangalore and two of its erstwhile partners to jointly forfeit “wrongful gains” of about $2.06 million plus interest within 45 days.
The Satyam fraud, one of the biggest financial frauds in the country, came to the fore in the year 2009, when its’s founder Ramalinga Raju admitted and confessed before capital market regulator SEBI to large-scale financial manipulations in the account books of Satyam Computer Service Ltd. The Satyam promoters allegedly inflated revenue and profits to showcase a healthy picture of the company when PwC was its auditor. Raju was sentenced to a seven year jail term in 2015 in connection with the fraud, along with other executives responsible for the fraud.
Meanwhile, PwC is hopeful of getting the courts to stay the SEBI order.
“The SEBI order relates to a fraud that took place nearly a decade ago in which we played no part and had no knowledge of,” Price Waterhouse said in a release.
“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,” said Price Waterhouse, adding it was confident of getting a court to stay the order before it becomes effective.
In 2013, PwC was also questioned by tax authorities investigating possible tax evasion by Finnish phone-maker Nokia. The questioning of PwC began a few days after the tax officials raided Nokia India’s factory near Chennai.
The majority of the world’s auditing services are performed by the Big four accounting firms.
Known as the ‘Big 4’, these firms completely dominate the industry, auditing more than 80 percent of all US public companies. The big four – ordered by size – are Deloitte LLP, PricewaterhouseCoopers (PwC), Ernst & Young (EY), and KPMG
The ‘Big 4’ accounting firms all provide assurance, audit, tax, human resources, transactional, performance improvement, and crisis management services. They serves sectors such as aerospace and defense, healthcare, hospitality and leisure, industrial manufacturing, real estate, retail and consumer, technology, transportation and logistics, financial services, entertainment and media, chemicals, metals, banking and capital markets, automotive, private equity, and more.
By size, PWC (PricewaterhouseCoopers) is presently ranked as the number two accounting firm in the world – only Deloitte is bigger. The company founded by Samuel Lowell Price began in London, 1849.
PwC has grown over the years, merging with Holyland and Waterhouse, then a final merger game in 1998 when Price Waterhouse and Coopers & Lybrand came together to create PricewaterhouseCoopers. The firm went on to shorten its brand name to PwC in 2010, however PricewaterhouseCoopers remains as the full legal name of the organization and is the name that is used by PwC firms to sign company audits.
It is important to note that PWC (PricewaterhouseCoopers), has not been convicted of any crime by any court of law in India. The Securities and Exchange Board of India (SEBI), India’s capital market regulator, is not a court of law and
PWC (PricewaterhouseCoopers) is presently challenging the SEBI two year ban in court.