Accounting regulator Institute of Chartered Accountants of India (ICAI) has taken the first step towards disciplinary action against
the arrested partners of Price Waterhouse, who audited the books of scam-hit Satyam Computer Services.

ICAI’s five member disciplinary committee has registered a case against Price Waterhouse partners, S Gopalakrishnan and Srinivas Talluri, and has sought information from the firm. If found guilty, the partners could lose their permit to practise. ICAI has given time till February-end to get information from the partners and respond to its questions. As per a government directive, ICAI had earlier asked for the ‘working papers’ or the audit methodology that PW followed in the last five years while auditing Satyam’s accounts.

ICAI president Ved Jain told ET that the financial review reporting board of the institute is looking into the working papers submitted by the audit firm.

A magistrate court in Andhra Pradesh on Tuesday dismissed the bail applications of Gopalakrishnan and Talluri, but remanded them to police custody for two days. Lawyers close to Price Waterhouse, who asked not to be named, told ET that the police’s version that the two had confessed to colluding with Satyam promoters in the fraud, was based on the fact that PW had withdrawn its audit opinion of Satyam. Recalling audit opinion is a statutory requirement when the audited company restates its financial statements, they said. Price Waterhouse had said on January 15 that its reports of Satyam’s accounts couldn’t be relied on.

Meanwhile, the audit firm stated that both Gopalakrishnan and Talluri have rebutted the prosecution’s allegations that they engaged in criminal conduct relating to Satyam Computer Systems’ auditing. “In particular, in their bail petitions, both maintained that they are innocent and that there was not an iota of material to link them with the accusations levelled against them. Their lawyers repeated this assertion during the bail hearing,” the firm said here.

It also denied the prosecution’s allegation that Gopalakrishnan and Talluri were not partners of Price Waterhouse Bangalore.