In a twist to the Satyam fraud case, a global IT research firm has revealed details which may point to a collusion between Price Waterhouse Coopers and Satyam Computers.

The report, by Gartner, indicates that PwC was in a strategic partnership with Satyam till last year, even as its Indian arm was auditing the firm headed by the disgraced Rajus.

The US-based Securities and Exchange Commission does not allow such a relationship. Even Indian auditing guidelines do not accept that statutory auditors can have a relationship with the audited company.

An auditor in India, working with one of the global Big-4 audit firms told the Financial Chronicle: Mind you, Satyam was SEC registered. And it is not allowed in accountancy norms to have the same firm as auditor and strategic partner.

A questionnaire sent to PwC by Financial Chronicle did not elicit any response. A Satyam spokesperson said that the company would not be able to comment on this matter. Satyam was taken over by Tech Mahindra last month in an auction supervised by government-nominated directors.

The Gartner report quotes PwCs own official as saying that Satyam did its system integration business for Idearc even while a five-year non-compete clause with IBM was in place after 2002. That year, PwC had sold a large part of its consulting practice to IBM for $3.5 billion, kicking in the clause.

A popular blog among auditing firm members internationally called Re:The Auditors quoted the Gartner report to say that the roots of the Satyam fraud might be deeper. Francine Mckenna, the blogger, and a former Big-4 employee, told the Financial Chronicle: The report is a clear indication of the fact that Satyam was a strategic partner to PwC globally enabling them to bypass both the constraints of their non-compete with IBM and to provide a viable solution for their lack of technical expertise and technical bench strength.

She said that the relationship between the two was for IT work at Idearc, and perhaps other projects. This relationship, she said, allowed PwC to enable via negligence or worse the humungous fraud that is Satyam.

The report, published in July 2008 is titled: PwC to World: We Implement. Since Octobe 1, 2007, when the non-compete agreement expired, there had been speculation as to whether PwC would get back into the IT implementation business, the report said. It then goes on to quote PwCs US Advisory Strategy Leader Joe Duffy who stated at the PwCs Analyst Day: With Idearc (a $3 billion Verizon spin-off), PwC was engaged through the full project life cycle. The Gartner report comments that Much of this engagement occurred while PwC was still under the IBM non-compete agreement and Satyam Computer Services did much of the system integration work. PwC also helped Idearc shift to an IT strategy heavily dependent on outsourcing, which saved the new company millions of dollars.

PwC also did some work for Microsoft, but its not clear whether Satyam was involved in this. On the basis of the Gartner report, Mckenna raised a question. Did the PwC leadership US, global, and Indian enable and perhaps promote complicity in the fraud called Indias Enron for the sake of their consulting business strategy?

Accountancyweb.co.uk, a popular website, also quoted the report and an accountancy commentator on the site said: What is surprising about this is that it doesnt seem to cross legislators minds that the obvious conflicts of interest exist.