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PwC may be quizzed by US regulator
January, 15th 2009

PricewaterhouseCoopers (PwC), which is facing a multiple-agency probe within the country for its unreliable audit of Satyam Computer Services leading to a Rs 7,000-crore accounting scandal, holds a further risk of being quizzed by US accounting regulator in India, said Institute of Chartered Accountants of India (ICAI) president Ved Jain.

For this, the Public Company Accounting Oversight Board (PCAOB), the US accounting regulator, does not even require an approval from the Indian government.

PCAOB, which is authorised to inspect the books of any firm that has audited the books of any US-listed company, will not require any regulatory approval in India, and can do its investigation as per its own norms. This will mean that in case a formal investigation is ordered by the PCAOB, PwC will be thrown open to a risk of losing its auditing rights in the US.

Incidentally, PCAOB had in early 2008, made inspection of the auditing processes of several international accounting firms that had audited US-listed Indian firms. An accounting consultant, on condition of anonymity, said the inspection had extended for all the Big Four audit firms in India, that includes PwC, Ernst and Young, KPMG and Deloitte.

Admitting this fact, a spokesperson for the US regulator said: PCAOB has performed inspection work in India. We do not, however, release the names of companies whose audits are reviewed.

Even as PwCs role in Satyams alleged accounting fraud is being investigated by the Indian government and its accounting regulator ICAI, the US counterpart can take independent actions if it finds it appropriate. This will mean that PwC as a firm may also lose its auditing rights in the US, if it is found guilty under the US norms.

As per the regulations in the US, the regulator can revoke its registration if a firm is found guilty after a formal investigation. Revocation of the registration is the maximum punishment that can be imposed by the PCAOB.

In India, the Serious Fraud Investigation Office (SFIO) has already begun looking into the affairs of PwC in the case, and is likely to come up with its report within 3 months.

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