The Securities Appellate Tribunal (SAT) on Monday quashed the two-year ban on audit firm Price Waterhouse Coopers from auditing any listed company, as imposed by the Securities and Exchange Board of India (Sebi) in the case of Satyam fraud involving Rs 7,800-crore in 2009.
However, SAT has ordered that the entire fee of Rs 13 crore can be taken back with interest from PwC, as there has been a breach of duty.
The ruling said, “there is no shred of evidence that the auditors fabricated, fudged or were in collusion with the management of Satyam Computer Services”.
Further, setting aside the ban on PwC, which is one of the Big Four global accounting firms, said that negligence does not amount to misconduct and the SEBI cannot take any action without direct evidence.
If the audit of Satyam was conducted in a careless or reckless manner by the audit firm PwC, then action can only be taken by national auditors watchdog ICAI (Institute of Chartered Accountants of India) against its members under the CA Act and not by SEBI.
SAT said “SEBI has no authority to look into the quality of audit and auditing services. SEBI can only take remedial or preventive action and direction issued to ban PWC is neither remedial nor preventive, just punitive”.
Therefore, Ruling concluded by stating “We find that there is no direct evidence to show that the engagement partners/audit firms/other PW firms were directly involved in the fabrication of the books of account of SCSL (Satyam).
In fact, the Chairman of SCSL has gone on record that the statutory auditors were kept in the dark and that they had no role to play in the fudging of the books of accounts.”
On January 8, 2009, Satyam Computer Services founder- chairman B Ramalinga Raju had publicly admitted and confessed to large-scale financial manipulations to the tune of over Rs 5,000 crore in the company’s books. A Sebi probe, however, found the scam was much higher at Rs 7,800 crore.
After the fraud came to the light, the government had ordered an auction for sale of the company in the interest of investors and over 50,000 employees of Satyam Computers which in April that year was taken over by the TechMahindra.