One of the world’s top accounting firms has been banned from auditing listed companies in India for two years.
The country’s financial regulator has punished PwC for failing to spot fraud of over $1 billion at defunct tech firm Satyam Computer Services.
The Securities and Exchange Board of India (SEBI) said PwC auditors had failed to uncover irregularities in Satyam’s accounts over several years that were subsequently revealed in 2009 by Ramalinga Raju, the company’s chairman at the time.
Raju admitted to inflating Satyam’s profits with “fictitious” assets, non-existent cash and misreporting of debts the company was owed. He was sentenced to seven years in jail along with nine co-conspirators in 2015.
Satyam was one of India’s leading software providers, with 53,000 employees and nearly 700 clients across 65 countries. (The company was bought by Tech Mahindra in 2009.)
PwC overlooked “several red flags…. which were all too obvious for any reasonable professional auditor to miss,” the Indian regulator said in its ruling published late on Wednesday.
SEBI also ordered the accounting firm to relinquish “wrongful gains” of around 130 million rupees ($2 million), plus 12% interest per year for the past eight years.
PwC said in a statement Thursday it was “disappointed” by the Indian government order, adding that there was no evidence to indicate any “intentional wrongdoing” on its part.
It is considering appealing the decision with the appropriate authorities, a source with knowledge of the matter told CNNMoney.
“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,” PwC said in its statement.
“We have, however, learned the lessons of Satyam and invested heavily over the last nine years in building a robust and high-quality audit practice.”
PwC currently audits more than 75 Indian companies covered by the order, and around 3,000 PwC employees could be affected, a source familiar with the matter told CNNMoney.
Its other businesses in India — including audits of unlisted firms — will not be impacted by the ruling. It will also be able to complete audits for listed companies for the current fiscal year ending March 2018.
CNNMoney (New Delhi) First published January 11, 2018: 10:52 AM ET
News credit : Cnn