The Securities and Exchange Board of India (Sebi), which is probing the accounting scam at Satyam Computer Services Ltd, seems to favour prohibiting Price Waterhouse and its arrested partners S. Gopalakrishnan and Srinivas Talluri from auditing any listed Indian firm or intermediary for a “certain period”. Price Waterhouse is the Indian arm of global auditing firm PricewaterhouseCoopers. Sebi’s interim report, reviewed by *Mint*, says the auditors had “failed to be vigilant in the conduct of their professional duties”, and had displayed “gross negligence” in the conduct of their audits of Satyam from March 2001 to September 2008. This “led to accumulation of false balances in deposit accounts in the books of the company”, the capital market regulator says in the report. On Monday, the Andhra Pradesh high court dismissed bail petitions filed by Gopalakrishnan and Talluri, saying the investigation into the scam was at a critical stage, according to the counsel for the auditors, C. Masthan Naidu. The auditors have been in custody since 23 January. Sebi finds ‘grave professional lapses’ on the part of Talluri, Gopalakrishnan According to T. Niranjan Reddy, counsel for the Central Bureau of Investigation (CBI), judge G.V. Seethapathy agreed with CBI that prima facie evidence existed on the diversion of funds and collusion of the auditors with Satyam’s promoters in the country’s largest accounting scam. Sebi is one of the several regulatory agencies probing the Rs7,136 crore fraud to which Satyam founder B. Ramalinga Raju confessed on 7 January. The software services firm was acquired in April by Tech Mahindra Ltd. Other agencies involved in the probe are the Serious Fraud Investigation Office of the corporate affairs ministry, CBI, the Registrar of Companies and the Institute of Chartered Accountants of India (Icai). Police arrested Ramalinga Raju, his brother and then managing director B. Rama Raju, then chief financial officer Srinivas Vadlamani and the two auditors for their alleged involvement in the scam, which triggered India’s biggest corporate fraud investigation. Sebi has found “grave professional lapses on the part of the auditors”, which are “directly tied into and inseparably a part of the fraud perpetrated in the capital market”, the Sebi report says. According to the market regulator, the action to be taken against Price Waterhouse and its two partners may include prohibiting them “from issuing any certificate with respect of compliance of obligations of listed companies and intermediaries registered” with it. The report says Price Waterhouse and its partners may be restrained “from accessing the securities market and prohibited from buying, selling or dealing in the securities of Satyam and its associate listed companies in any manner whatsoever for a particular period.” Sebi, however, has not specified any time frame for this. The investigation is not complete and Sebi’s report is an interim one listing possible action. Sebi has issued a show-cause notice to the accounting firm and received its response. A show-cause requires a firm—Price Waterhouse in this case—to explain its position. Sebi officials declined to comment on the report and its findings.
Price Waterhouse confirmed that it received a notice from Sebi some months ago as part of its investigation, but denied any knowledge of the report. “We are actively responding to Sebi in relation to its enquiries. This is an ongoing investigation that is some way from being completed. We are not aware of any Sebi report making any recommendations,” the audit firm said late last week in an emailed response to *Mint*’s query. It also said, “Price Waterhouse remains committed to cooperating with the various agencies looking into the Satyam situation, including Sebi.” Sebi has observed that Price Waterhouse had failed to comply with the code of ethics issued by Icai, the accounting regulatory body, as well as auditing standards generally accepted in the country, and “given false assurance that the financial statements are free of material misstatement”. In a significant comment about insider trading, the market regulator said, “The financial results of Satyam were overstated and its promoters and insiders knew about it. “When they were selling the shares of Satyam over the years when in possession of this unpublished price sensitive information, this led to insider trading. Price Waterhouse and its two partners are responsible for this by certifying the financial statements of Satyam in violation of well established auditing standards and practices.” Source: www.livemint.com -- Thanks & Regards, Abhishek Kothari --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
