Finding PwC guilty in the 9-year-oldSatyam scam, SEBI has banned PwC and its network entities from issuing audit certificates to any listed company in India for two years.
This is said to be one of the most stringent orders passed by any regulator against a Big Four auditor.
SEBI has also ordered the disgorgement of over Rs. 13 crores of wrongful gains from the auditing firm and its two erstwhile partners who worked on the IT company’s accounts.
The order has been passed under the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) regulations and Section 11 of SEBI Act which empowers SEBI to pass order and directions in the interest of investors.
In the order, SEBI has imposed a two-year ban on entities/ firms practicing as chartered accountants in India under the brand and banner of PwC from directly or indirectly issuing any certificate of anaudit of listed companies, compliance of obligations of listed companies and intermediaries registered with the regulator.
"A common investor's reliance on the audit certifications of Satyam Computer at the relevant point of time was dependent on the fact that it was attested by one of the internationally reputed firms called PW. The public had no reason to believe that the audit reports were false and misleading. In this context, the long period during which the falsification of account books took place, without the same drawing the attention of PWCIL or other PW entities in India, points to a systemic problem in the audit processes carried out by the PW entities," SEBI noted in their order.
As per SEBI, the auditors made material representations in the certifications without any supporting documentation.
“The acts of the auditor induced the public to trade consistently in the shares of the company,” it said.
During its investigations, the SEBI found that the company relied on the documents, such as bank account statements, fixed deposit statement, that originated or had been sourced from the company itself.
“Bank statements should have been directly verified with the banks,” SEBI added in its order.
“By relying on the bank statements obtained from the auditee company merely on the ground that the statements looked genuine and did not arouse suspicion, PW clearly defied the auditing standards and principles,” it added.
As per the regulator, an auditor is supposed to perform the audit with an attitude of professional skepticism and not get affected by a company’s reputation during the critical process of evaluation.
Attached is the 108-page order made by the SEBI on the case.