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Two PwC officials arrested

The Andhra Pradesh state police on Saturday arrested two auditors of PricewaterhouseCoopers, Talluri Srinivas and S Gopalakrishnan,on charges of criminal conspiracy and cheating after the alleged falsification of accounts at Satyam Computer Services, said additional director general, criminal investigation department, A Siva Narayana.

The arrest of the two auditors, for the first time in the history of corporate India, sent shock-waves among the 1,50,000-odd chartered accountants’ fraternity here. The two auditors were produced before the magistrate today and the hearings were on till the time of going to the Press.

The role of PwC, the statutory auditor for Satyam, came under scrutiny after the software firm’s founder B Ramalinga Raju confessed on January 7 to perpetrating a Rs 7,000-crorefinancial fraud.

“We greatly regret that two Price Waterhouse partners have been detained today for further questioning. We do not know the basis for them being detained. Over the last fortnight, the firm has fully cooperated in all inquiries and has provided the documents called for by the Indian authorities. We share the regulators concern in understanding the full extent of the fraud and how it was accomplished.

Like everyone else, we were shocked by the massive fraud at Satyam and by the steps undertaken to conceal it. PW-India will continue to cooperate fully with the authorities,” said an official statement from PricewaterhouseCoopers. PwC took shelter under the roof of client confidentiality.

PwC said it was examining the contents of Raju’s confession. The police raided the audit firm’s offices and questioned both Srinivas and Gopalakrishnan who had certified the audited financial statements of the firm. The two auditors were, in fact, not partners of PwC but members of Lovelock & Lewes, a member firm of PwC at the time of signing of the accounts in April last year.
ICAI, an apex body for accountants and a quasi-judicial body, also issued a notice to PwC seeking information on the partners and copies of the accounts of Satyam that were audited by the firm. Later, PwC admitted that the audit was “false and no longer reliable” and withdrew its opinions on Satyam’s financial statements.

Investigating agencies including the Serious Frauds Investigation Office and SEBI are now probing PwCs role to ascertain if they connived with Raju to doctor the books.
“We need to wait for the investigations to be completed on the issue. We are really concerned over the developments which have taken place today. This raises serious doubts about the role of auditors and their involvement in the Satyam case. But this an aberration and not a systemic failure,” Ved Jain, president of the Institute of Chartered Accountants of India told ET.

Raju, his brother Rama Raju and chief financial officer Srinivas Vadlamani are in prison now. Srinivas confessed to the police that the statutory auditors (PwC) never pointed out any “deficiencies” during their discussions with him, according to the police.

PwC had audited around 139 companies in India in the last fiscal. Of this, 97 are listed and 45 are part of BSE 500 Index. A few of these companies including Glenmark Pharma are already reviewing their relationship. Some other large companies audited by PwC include Maruti Suzuki, United Breweries, United Spirits, GMR Infra, Piramal Healthcare and Marico.

Source: ET


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