PricewaterhouseCoopers (PwC), one of the world’s largest professional services and tax advisory firms, may lose its licence and be banned from practicing in India if there is evidence it colluded with Satyam promoters, says Ved Jain, president of the Institute of Chartered Accountants of India, an industry body that regulates auditors and chartered accountants, in an interview with ET’s Souvik Sanyal. ICAI has set the ball rolling by issuing a show-cause notice to PwC.
Is there prima facie evidence of negligence by PwC?
An auditor is responsible for not just bringing out the correct picture of the financial status of a company, but also to see that any discrepancy in the maintenance of accounts does not go untracked. So there has been a negligence on the part of the auditors.
What action can you take against PwC if your investigation finds it guilty?
There can be a lifetime ban on the practising rights of the auditors caught guilty in the matter. We can cancel their licence.
Who will face action within PwC?
These are quasi-criminal proceedings. So action cannot be taken against any firm in particular. We have to take action against a person or persons in particular. We have to identify the auditors involved in the matter, so that action can be directed against them.
Besides action by ICAI, what other action can be taken against PwC?
As it seems there has been manipulation of records, a case can also be made against them under the Indian Penal Code (IPC) for cheating and forging of records. Moreover, the guilty auditors can be made liable under the Companies Act.
The ministry of corporate affairs has yet to decide the action it can take against Satyam and is waiting for the Registrar of Companies to submit its report first. So your actions will be independent?
These actions, if taken, will under the ICAI Act. We at the institute have guidelines for audit firms. If they are not followed, we can take action against auditors.
When will you begin your probe?
On the basis of information we have in our possession, we can register a case against PwC. We will collect evidence and issue a show cause notice to the auditor. The evidence will be collected by ICAI’s director of discipline.
What will form part of the evidence?
As has been reported, Satyam’s profit figures have been overstated. So, material evidence means we will gather the financial statements and the balance sheet of Satyam for the period for which the discrepancy has been alleged. As we do not have all the relevant financial documents of the company in our immediate possession, we will approach the RoC to get us the details we might require
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