The punishment, for a failure to detect Satyam’s billion-dollar fraud, serves as a warning to those too close to clients
MUMBAI—India’s market regulator has banned PricewaterhouseCoopers’ affiliates from auditing listed companies for two years as punishment for their failure to detect a billion-dollar fraud at outsourcer Satyam Computer Services Ltd.
PwC was in charge of checking Satyam’s accounting during the period its founder admitted, in 2009, he had padded revenues by close to $1 billion by inflating sales and forging bank documents.
The founder, Ramalinga Raju, and his brother Rama Raju, who was managing director of the company, were sentenced to seven years in prison in 2015 for the fraud. Their disgraced company—once one of the top software and outsourcing companies in the world—was bought by Tech Mahindra Ltd.
In its 108-page ruling released late Wednesday, the Securities and Exchange Board of India said PwC’s punishment should act as a warning to accountants that get too close to their clients.
“It is incumbent on SEBI to take stern view of market abuse and fraudulent practices, particularly when persons tasked with protecting the interest of investors are themselves hand-in-glove with the main perpetrators of the fraud,” the ruling said.
PwC said its accountants were duped and it is confident it can reverse the order in court.
“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,” it said in a statement. “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,” the company’s statement said.
The SEBI also ordered PwC and two of its accountants to pay 131 million rupees ($2 million) plus interest, for what it said were “wrongful gains” related to its auditing of Satyam.
The accountants—S. Gopalakrishnan and Srinivas Talluri —were also sentenced to seven years in prison in 2015 for the scam. At the time, PwC said that it was disappointed by the verdict and that there was no evidence the partners had knowledge of the fraud.
Write to Corinne Abrams at corinne.abrams@wsj.com
News Source by The Wall Street Journal