PwC fined for failing to detect Satyam fraud

Indian branch of accounting giant 'failed to comply with elementary auditing standards', US regulator says

PricewaterhouseCoopers has been fined US$7.5 million over the fraud at Indian outsourcer Satyam.

The news comes during a week that Satyam itself agreed to a $10 million penalty. Both fines will be paid to the US Securities and Exchange Commission.

The fines relate to the false reporting of over $1 billion in profits at Satyam, which was once one of India's largest independent outsourcing companies and is now part of former rival Tech Mahindra. Satyam's then chairman Ramalinga Raju admitted to the fraud in 2009, after Satyam had created false invoices and bank statements to nearly double the value of its assets over a five year period.

PwC's India branch had not independently checked cash balances in Satyam bank accounts, the SEC said.

By settling the charges, the companies have not admitted or denied the allegations. In a statement, PwC said US regulators had not found "that PW India or any of its professionals engaged in any intentional wrongdoing or was otherwise involved in the fraud perpetrated by Satyam management".

But the SEC said: "PW India violated its most fundamental duty as a public watchdog by failing to comply with some of the most elementary auditing standards and procedures in conducting the Satyam audits."

Indian authorities have also filed criminal charges against several former company executives, including Raju.

Satyam, besides agreeing to pay the $10 million penalty, has also agreed to train company officers and employees concerning securities laws and accounting principles, and improve its internal audit functions. Satyam also agreed to hire an independent consultant to evaluate the internal controls the company is putting in place, SEC said.

The settlement with the SEC will help Satyam relist on the New York Stock Exchange, after it is done with restating its accounts in accordance with US accounting rules. It expected to restate the figures in about eight months.

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