SEBI’s (2 year) bar against PwC over Satyam Scam, not its first controversy


The Securities and Exchange Board of India (SEBI) has barred global accountancy firm PwC and its network entities from issuing audit certificates to any listed company in India for two years.

However, SEBI noted that this order would not impact audit assignments relating to the financial year 2017-18 undertaken by the firms forming part of the PwC network.

The regulator has also asked PwC to pay Rs 13.09 crore, along with interest at 12% per annum from January 2009 (approximately Rs 14 crore) for wrongful gains.

Two former PW partners, S Gopalakrishnan and Srinivas Talluri, have also been barred from issuing audit certificates to listed companies for three years.

This 108-page order by whole-time member G. Mahalingam, stems from the Satyam scandal of January 2009. The order comes nine years after the scam at Satyam Computer Services came to light and after two failed attempts by PwC to settle the case through the consent mechanism.

On January 7, 2009, the Chairman of Satyam Software Services Ltd, Ramalinga Raju, confessed to a Rs. 7,136 crore fraud committed by him and a few others at the company.

The scam highlighted several loopholes in the Indian corporate governance structure – unethical conduct, fraudulent accounting, insider trading, oversight by auditors, ineffectiveness of Board, failure of independent directors and non-disclosure of material facts to the stakeholders. This resulted in a series of corporate governance overhauls including setting up of a committee by the CII, tightening of screws on role of audit committees and stricter provisions in the Companies Act, 2013.

This is however, possibly the road to the final leg of the journey, which PwC must have seen long coming. As reported by ET, below is a listing of major controversies the firm and its entities have landed in recent times:

  • Sarvesh Mathur, who was CFO of PwC between 2008 and 2011, filed a defamation suit in July last year accusing his erstwhile employer of cooking books, evading tax, wilfully breaking several laws and then intimidating, cheating and tarnishing his name when he refused to help cover-up the white-collar crimes.
  • In July last year, former chief justice of the Delhi High Court AP Shah wrote to the Prime Minister, questioning PwC’s integrity and competence to render audit and advisory services to clients, including the government.
  • In March last year, ruling BJP’s Lok Sabha MP Kirit Somaiya posted on Twitter a document, according to which, he demanded action against PwC network for its alleged role in various scams related to Global Trust Bank, Satyam and Vijay Mallya/Kingfisher airlines/UB group.
  • In a petition to the Supreme Court in 2013, Center for Public Interest, a non-profit organisation headed by activist-lawyer Prashant Bhushan, sought a probe into allegations of irregularities and malpractices by PwC and its related companies.
  • In 2013, PwC was questioned by tax authorities investigating possible tax evasion by Finnish phone-maker Nokia.

And in its latest order, the Regulator, after considering all the evidence has found that there has been a total abdication by the auditors of their duty to follow the minimum standards of diligence and care expected from a statutory auditor, drawing an inference of malafide and involvement on their part.

In its ruling, SEBI has also said it was incumbent upon it to take a “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 objective of insulating the securities market from such fraudulent accounting practices perpetrated by an international firm of repute will be ineffective if the directions do not bring within its sweep, the brand name PW. The network structure of operations adopted by the international accounting firm should not be used as a shield to avoid legal implications arising out of the certifications issued under the brand name of the network”, the Regulator said.

(Read the order)


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